Big Game Advertising and Investment Insights
The crucial match is here. This Sunday, the Seattle Seahawks will face the New England Patriots in Santa Clara, California. As is tradition, companies will pour millions into promoting their products during the broadcast.
At Morningstar, however, we view investing in stocks based solely on game-day ads as somewhat of a gamble. Instead, we suggest adhering to Morningstar’s investment strategy. This focuses on acquiring undervalued stocks of strong companies and holding onto them for the long term. We believe this approach is a solid strategy in any market condition.
That said, there are several strong “wide moat” companies that will advertise during the game, and their current stock valuations seem undervalued. We think these stocks are the wisest choices for long-term investment.
Four Undervalued Stocks to Consider Before the Big Game
- INTU Intuit
- META Platforms
- Mondelez International
- Salesforce
Next, we’ll give a brief overview of each of these wide-moat stocks, along with insights from Morningstar analysts who track them.
Intuit
Morningstar analyst Luke Yang shares his perspective on Intuit, a company with a variety of small business and tax software products that dominate their market segments.
Intuit’s Enterprise Suite, which integrates the capabilities of Mailchimp and QuickBooks, positions it well for expanding into midsize businesses. The company’s DOM product enhances its offerings by using AI to provide real-time support across its platforms. While large companies may need complex systems, smaller enterprises often prefer a user-friendly solution that manages accounting and payroll in one place. We believe Intuit’s new strategies will attract growth by simplifying processes for high-growth companies.
Intuit also connects customers with tax professionals through TurboTax Live, and offers similar services via QB Live and Mailchimp Live—these features significantly differentiate Intuit in a competitive landscape. They also open up several upsell opportunities, enhancing overall revenue in established markets.
Meta Platforms
Following the latest earnings report, Morningstar senior analyst Malik Ahmed Khan provided his insights on Meta.
Meta’s fourth quarter results were impressive, with a revenue increase of 24%, amounting to $60 billion. However, the operating margin decreased due to rising AI-related expenses. The company anticipates significant capital and operational costs ahead.
Key Takeaway: Despite these challenges, Meta’s advertising business is thriving, thanks to successful AI investments that improve engagement and ad effectiveness. Performance metrics, especially in video content, remain robust.
- The company has seen an 18% rise in ad impressions this quarter, partly due to users spending more time on platforms like Facebook and Instagram.
- Although some recent metrics are modest, they signal considerable revenue potential as Meta continues to enhance its AI capabilities.
Outlook: With expectations of a 30% sales increase in the first quarter, largely driven by advertising demand, Meta’s growth trajectory appears promising.
Mondelez International
After Mondelez announced its fiscal results, Morningstar director Erin Rush provided an analysis.
Organic sales rose by 5% in the last quarter of Mondelez’s fiscal year, propelled mainly by price increases. Nonetheless, inflation impacted the adjusted gross margin, which slipped to 30.5%.
Why It Matters: Given recent inflationary pressures, Mondelez is positioned to innovate while also exploring alternative channels for wider reach, even though short-term volume challenges may arise.
- Despite market fluctuations, we believe expanding exposure to less penetrated channels is a smart strategy for Mondelez.
Conclusion: While Mondelez’s shares dipped by 4%, the company remains a strong pick for investors seeking quality.
Salesforce
In a recent note, Morningstar senior analyst Dan Romanoff discussed Salesforce’s performance and how it benefits from AI advancements.
Salesforce’s revenue rose 8% to $10.26 billion, reflecting a solid outlook for the company. Its artificial intelligence efforts are gaining traction, with significant year-over-year growth in key revenue streams.
Key Takeaway: AI’s role is becoming increasingly important, and Salesforce’s strategies suggest they are well-positioned for future success.
- Billings are growing faster than revenue, which bodes well for short-term performance.
Future Directions: Salesforce is optimistic about continued revenue growth, especially as it aims for significant milestones in the coming years.
Advertising Trends and Investment Advice
The landscape is competitive, and while the game might draw attention from consumers, careful consideration is essential before jumping into investments based solely on advertising trends.
