The digital ad market had a strong first quarter, with companies like Meta (META), Alphabet (GOOGL), and Amazon (AMZN) all beating expectations. Interestingly, Amazon’s ad revenue grew the fastest, up 19% from a year ago, while Meta and Google saw 16% and 9% growth, respectively. Smaller platforms like Reddit (RDDT), Snap (SNAP), and Pinterest (PINS) also beat sales estimates. However, analysts believe that this strong performance may be the peak, as rising tariffs and economic uncertainty could slow things down later this year.
Indeed, executives are already warning about slower ad spending ahead. Meta’s CFO said that Asian e-commerce companies like Temu and Shein are pulling back due to the end of a trade loophole that once helped them. Alphabet and Pinterest shared similar worries. In addition, Snap went even further by removing its second-quarter guidance entirely due to economic unpredictability. As a result, some experts think that this could hurt overall ad budgets, especially in retail and packaged goods, which make up a large share of U.S. social media ads.
Unfortunately, it is smaller ad platforms that may be hit hardest if advertisers shift their spending to larger platforms seen as more reliable. Nevertheless, even major players like Meta could feel some pain. Analysts noted that while U.S. retailers may now run more Facebook ads, they likely won’t spend as aggressively as Temu did, especially with rising tariffs and supply chain problems raising costs. This led to Wells Fargo’s Sameer Samana saying that higher tariffs are likely to weigh on the broader market and make this strong quarter potentially the best we will see in 2025.
Which Digital Ad Stock Is the Better Buy?
Turning to Wall Street, out of the six stocks mentioned above, analysts think that RDDT stock has the most room to run. In fact, RDDT’s average price target of $158.86 per share implies more than 48.2% upside potential. On the other hand, analysts expect the least from SNAP stock, as its average price target of $9.63 equates to a gain of 16.4%.
