When recession strikes, the advertising and media sectors are the first ones to see a noticeable impact. Companies tend to reduce their advertising budgets when the going gets tough. As a result, media companies that rely heavily on advertising spending fail to hit their revenue targets. So, if investors want to look at red flags for recession, advertising and media stocks offer good insights.
While media companies across the board feel the heat of reduced advertising budgets, some companies tend to fare better. These are mostly the ones that have diversified their income streams to reduce reliance on advertising.
In this post, we look at stocks that are likely to struggle if ad spending goes down. To come up with our list of top 10 advertising and media stocks that could tank if recession hits, we only looked at stocks that had a market cap of at least $5 billion.
Roku (ROKU): ‘Completely Speculative, But Get Ready to Pounce’ Says Jim Cramer
A large movie theatre filled with people enjoying a film streaming on a smart TV.
10. Netflix, Inc. (NASDAQ:NFLX)
Netflix, Inc. operates as an entertainment service provider. It provides TV series, games, documentaries, and feature films across different languages and genres in over 190 countries. Owing to its strong subscription-based business model, the stock is the least likely to be affected if ad spending goes down.
The streaming giant was upgraded last month by Moffett Nathanson with an increased price target of $1,100. The upgrade was based on Netflix's potential to boost profits through better monetization and ad expansion. Moffett predicts continued advertising expansion and subscription growth to boost profit margins to 40% by 2030.
Moffett Nathanson highlighted the company’s growth potential by saying:
We now forecast Netflix will generate over $6 billion in advertising revenue in 2027 and almost $10 billion by 2030
Similar sentiment was shown by Morgan Stanley as it maintained its Overweight rating for the entertainment firm last week. MS named the stock as its top pick in entertainment and media stocks. Analysts predict the company to show flexibility in a challenging global macroeconomic situation, replacing stocks like Disney.
After reporting Q1 results three weeks ago, the management reaffirmed its 2025 guidance. The streaming firm plans to invest in growth strategies and return excess cash to shareholders in the form of share buybacks. It aims to generate free cash flow amounting to $8 billion in 2025. Despite the clouds hanging over ad spending, Co-CEO Greg Peters highlighted plans to double advertising revenue by utilizing their proprietary ad-tech platform to improve targeting capabilities and advertiser flexibility.
9. The Walt Disney Company (NYSE:DIS)
The Walt Disney Company is a global entertainment company. The company operates in Sports, Experiences, and Entertainment segments. It distributes and produces television and film content under Disney, Fox, Freeform, National Geographic, ABC Television Network, FX, and Star brand television channels.
The entertainment firm announced the launch of its new streaming service for ESPN. The streaming service will combine content from Disney’s SVOD ESPN+, potentially user-generated content, and the ESPN linear television channel.
The service costing around $25 - $30 per month could reach 30 million subscribers over the next few years, adding $7.5 billion in revenue. If the company’s ESPN turnaround succeeds, it could add significant revenue, helping the company survive an ad spending slowdown.
The firm’s pricing strategies and strategic investments set it up for long-term growth, mainly in the Experiences segment. Theme park admissions, one of the most significant revenue sources so far, grew its revenue from $8.60 billion to $11.17 billion from 2020 to 2024. The company's domestic parks attendance significantly improved by more than 114%.
In case of a recession, DIS still remains a risky stock. However, the earnings announced this week have forced analysts and investors to rethink their thesis on the stock. DIS jumped 10% after posting strong earnings, then doubled down with the announcement of a $30 billion theme park and an Abu Dhabi resort! The diversification could help Disney withstand any slowdown in ad spending.
8. Alphabet Inc. (NASDAQ:GOOG)
Alphabet Inc. provides different platforms and products. The company operates through Google Cloud, Google Services, and Other Bets segments. It offers various products and services, including Google Drive, Search, ads, devices, YouTube, Google Maps, Android, and others. The company also offers internet and healthcare-related services.
Nielsen presented a report recently, a monthly snapshot of total broadcast, streaming consumption via TV, and cable. According to the report, YouTube was the leading media distributor in the US for March, accounting for 12% of overall TV viewing.
At the start of this month, GOOG entered into a new non-exclusive agreement with Samsung Electronics. This deal enables Samsung to use alternative search products with no exclusivity requirements.
The company’s stock has declined significantly, providing a potential buying opportunity. With the stock trading down 20% YTD, there is value. However, Apple has just announced an AI search offering. Google pays Apple approximately $20 billion per year to have its search engine as the default search engine in Apple devices. Once this relationship ends, Google will be dealt a big blow. The stock tanked 7.5% as this news came out, clearly reflecting investor concerns.
7. Meta Platforms, Inc. (NASDAQ:META)
Meta Platforms, the firm that owns platforms like Facebook, WhatsApp, and Instagram, is a business that thrives on advertising revenue. A recession, which usually damages small and medium-sized businesses, will deal a big blow to the company's finances.
On top of all that, META is facing more heat than usual on the regulatory front. The company was recently sued by a group of 67 top French media companies for illegal business practices, resulting in an unfair domination of the digital ads business.
This comes after META was fined 200 million Euros for breaching the DMA, Europe's Digital Markets Act. META continues to protest, arguing the Commission's policies force META to offer an inferior product to European users. However, the continent has decided to value privacy over profits, and that's what the company has to deal with.
For now, META continues to report strong earnings despite adverse market conditions. The bigger question is, once the economy starts to show weakness, will the earnings stay strong?
6. Snap Inc. (NYSE:SNAP)
Snap Inc. is a technology company. It provides Snapchat which is a visual messaging application with different tabs including visual messaging, stories, spotlight, snap map, and camera. The company also offers Spectacles, Snapchat+, and advertising products.
The technology firm has just introduced three new AI-driven video lenses. These lenses use the company’s in-house video generative model. This move aims to keep the tech firm competitive against major rivals Instagram and TikTok with its AI tools.
SNAP reported earnings last week, and Q1 revenue grew 14% YoY. The growth drivers were direct response advertising and small and medium-sized businesses: the two variables that will go down in the case of a recession. The company is not very well diversified and could take a serious hit if ad spending goes down. The stock has already lost half its value in a year and could go further down.
5. The Trade Desk, Inc. (NASDAQ:TTD)
The Trade Desk, Inc. is a technology company. It provides a self-service cloud-based ad-buying platform that enables buyers to optimize, manage, plan, and measure data-driven online ad campaigns. The tech firm serves advertisers, advertising agencies, and other service providers for advertisers or agencies.
For the first time in 8 years, the company missed revenue guidance in the most recent quarter. It also fell short of guidance on the profitability front, missing adjusted EBITDA estimates. Management highlighted that this miss was due to a series of minor execution missteps. However, the tech firm still ended the quarter with no debt and $1.9 billion of cash.
Due to the guidance miss and tariff concerns, the stock has gone through major headwinds. The share price has experienced a significant decline, falling 52% so far this year.
At the current price level, the stock presents a compelling buying opportunity as recession worries seem priced in. Wall Street analysts have shown their optimism through Buy ratings on the stock. Based on 39 analysts' ratings, the company has a higher target price of $150, highlighting that the share price could nearly triple from its current price levels in the case of a bull scenario. With such an attractive upside of 209% along with the current stock price dip, the opportunity is enticing.
4. Paramount Global (NASDAQ:PARA)
Paramount Global is a streaming, entertainment, and media company. The company operates in Filmed Entertainment, TV Media, and Direct-to-Consumer segments. A recession is likely to hinder one of the best business turnarounds in recent media history.
PARA found itself at a crucial juncture: wait for traditional media to die or transition quickly to a streaming service provider. With high debt, the company could not just muscle its way to a successful streaming platform. Against the odds, it slowly improved its Paramount+ and Pluto offerings and is expected to turn these into a profitable part of the business this fiscal year.
In the last quarter of 2024, the company gained an additional 5.6 million subscribers for Paramount+. The watch time for Pluto TV also grew by 8%. The media firm is setting itself up to monetize this growing subscriber base, but if ad spending takes a turn for the worse, the turnaround will have to wait a little longer.
3. Fox Corporation (NASDAQ:FOX)
Fox Corporation is an entertainment, sports, and news company. It operates in Television, The FOX Studio Lot, Credible, and Cable Network Programming segments.
The company recently announced the acquisition of Red Seat Ventures, a media company. Red Seat Ventures supports digital content and podcasts for creators like Megyn Kelly, Bill O'Reilly, and Tucker Carlson. This deal is all about investing in the growing creator economy, as Cheesbrough highlighted:
It is one of the fastest growing media categories worldwide by measure of reach and influence, and consumers are increasingly looking to get insights and entertainment directly from the voices and brands they trust.
The firm announced the launch of a direct-to-consumer service by the end of 2025. This service is designed for individuals who have never abandoned traditional TV cables. Lachlan Murdoch clarified that the service will be priced reasonably and won’t require extra rights costs. For 2025, Fox’s Tubi is anticipated to exceed $1 billion in revenue, fueled by its targeted advertising capabilities and large ad-supported video library. While this segment drives the company's bullish thesis, a recession could spoil the company's plans.
2. Warner Bros. Discovery, Inc. (NASDAQ:WBD)
Warner Bros. Discovery, Inc. is an entertainment and media company. The company operates in DTC, Studios, and Network segments. It also offers content through various distribution platforms, including authenticated GO applications, linear network, direct-to-consumer subscription products, and others.
WBD has had a good year as a business, even if the stock has offered mixed returns. The company now has a 6.7% TV and streaming market share, one that is likely to grow moving forward.
The problems that the company faces are slightly different, though. It has $9.64 billion worth of debt maturing over the next three years. The management has already cautioned investors to have muted expectations. If a recession hits, the deleveraging process could get even slower.
The management has also hinted that it will take time to arrest the decline in advertising revenue, another factor that a recession will delay. WBD, therefore, is a stock that could take a bad hit from a recession.
1. Roku, Inc. (NASDAQ:ROKU)
Roku, Inc. is a TV streaming platform operator. It operates in the Devices and Platform segments. The company’s streaming platform enables users to access and find news, TV shows, sports, movies, and similar content. It offers streaming services distribution, digital advertising, sale of streaming players, audio products, and other products and services.
Last month, the firm was upgraded by Bank of America (BofA) with a Buy rating and a price target of $100. The upgrade was based on the company’s strong user base and its growth potential.
Brent Navon, BofA Securities analyst, highlighted the company’s profitability trajectory by saying:
We believe Roku provides an attractive combination of top-line growth, margin expansion, and scaling free cash flow generation
The company's streaming market share has been growing steadily, and with it, the advertising revenue as well. Like a handful of other streaming stocks, ROKU's bull thesis also relies on its advertising revenue, and once investors start seeing that slow down, the stock could fall even further.
While we acknowledge the potential of ROKU as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than ROKU but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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