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Morgan Stanley analyst Benjamin Swinburne on Thursday nearly doubled his U.S. advertising growth forecast for 2021, while also boosting his 2022 estimate.
The Wall Street expert increased his expectation for ad gains in the current year from 12.1 percent to 22.9 percent. For next year, he lifted his projection from 12.2 percent to 14.1 percent.
“A unique cocktail of a well-funded consumer (sitting on excess savings after the coronavirus pandemic), inflation and the power of digital advertising leads to (an) unprecedented growth outlook,” the Morgan Stanley analyst wrote, but also highlighted strength in TV, particularly TV giants’ streaming services. He noted that gross domestic product growth has also turned out “modestly better than originally expected,” but “the corresponding surge in ad spending has been much more substantial.”
Swinburne pushed his 2021 forecast for U.S. TV ad improvement from 3.3 percent to 6.8 percent, with 2022 moving from 6.6 percent to 7.1 percent.
“Linear TV is dead, long live TV,” Swinburne wrote, noting three trends in video advertising. “1. advertisers continue to value sight, sound, and motion advertising across platforms, 2. linear TV ratings are shifting more and more to live audiences anchored by sports and the NFL, and 3. every major ‘broadcaster’ has established a streaming/AVOD business that is sold with its linear inventory.”
While highlighting “an inconsistent approach to disclosure across the industry,” he said he has incorporated “digital extensions” into “TV” estimates in his forecast. “This includes ViacomCBS’s Pluto, Fox’s Tubi, and Discovery’s streaming platforms as examples,” but “we continue to embed Hulu in ‘online video’,” Swinburne explained.
Better-than-expected online ad growth is the biggest driver of his upgrade though. “With digital advertising over 65 percent of the U.S. market, naturally this outperformance is coming primarily in digital channels, led by search,” the analyst explained.
Excluding audio, he sees internet ad spending growing 34.2 percent this year, up from his earlier 18.3 percent forecast, followed by 17.5 percent, up from 14.3 percent, in 2022. Within that category, he projects online video growth of 50.0 percent this year, up from 32.1 percent previously, and 2022 gains of 23.2 percent, down from 24.5 percent.
After next year, however, year-over-year ad growth comparisons will “get tougher,” Swinburne highlighted, but added: “We still see compelling opportunities” in his overweight-rated stocks, which include Facebook, Google, Snap and Fox Corp.
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