What's Behind Ad Tech's Unexpected Stock Price Jump?

The economic impact of the Covid-19 pandemic has been acutely felt by ad-tech companies, primarily because programmatic ad campaigns are comparatively easier to switch off than traditional advertising. Many companies in the space have been quick to make cutbacks, with even Google warning investors in its recent earnings call that tough times were ahead for the digital advertising market. Criteo, one of the few remaining publicly listed ad-tech companies, joined this cautionary chorus in its Q1 earnings call five weeks ago. However, on Wednesday, it issued an update that Q2 is not shaping up to be as bad as previously feared. “Overall revenue trends have been better than were expected at the time of the company’s April 29, 2020, guidance for the second quarter of 2020,” according to an update on Criteo’s investor relations page. Criteo’s leadership is still refraining from issuing a Q2 revenue forecast, but the reaction among investors was positive, with Criteo’s stock price closing at $13.25 per share–up 19.05% from its June 2 closing price of $11.13. It's up another 3% in trading today. Dan Salmon, managing director of equity research at BMO Capital Markets, told Adweek that Criteo’s earlier conservative guidance was likely due to clients, many of whom are in the retail and travel industries, pressing pause on campaign spend amid the Covid-19 pandemic. As lockdown measures across the globe begin to ease, some marketers are loosening their grip on the purse strings with performance-based ad campaigns—one of Criteo’s core competencies—a favored tactic in the early phases of economic recovery. Additional concerns for ad-tech companies, and investors, had been the upcoming enforcement of the California Consumer Privacy Act, which will begin July 1, but authorities are unlikely to begin immediately issuing large fines to companies that use data monitoring to serve ads, according to sources. [article_summary section="1"]Criteo’s earnings update apparently had a halo effect on its peers, with the stock prices of Rubicon Project and The Trade Desk experiencing a 15.83% and 11.46% jump respectively on Wednesday. “If you looked at the broader market, some of the bigger FAANG stocks [Facebook, Amazon, Apple, Netflix, Google] were generally down," Salmon said. "I do think that investors are starting to look a little bit beyond Google, Facebook and Amazon, particularly through the coronavirus downturn. “And the mid-size, smaller players in the ecosystem are benefiting as the recovery is starting to flow through to them as well," he added. "The strength of ad tech stocks today [June 3] was largely due to the positive data point from Criteo. “You combine that with the fact that this is a sector that’s generally unloved [by investors], and any incremental positive news can have an especially positive effect on stock prices.”