Advertising Trends Looks Favorable in 2010, according to Magna

Magna released its U.S. advertising forecasts for 2010 through 2015. In it the research firm forecasts U.S. advertising, ex-political, to remain flat in 2010 and then grow by nearly 2% in 2011. This follows a 14.6% advertising decline in 2009.

See my previous write-up on stocks to buy in a cyclical advertising recovery.

Not surprisingly, paid search is projected to grow the fastest in 2010, with 13% yea-over-year growth. This is good news for Google and Microsoft and would be good news for Yahoo! if they no longer lose market share. Then again I suppose that losing share in a growing market my not be that dreadful financially. Online display advertising is expected to grow 10.6% in 2010, which is good news for Yahoo, as the leader in the space, and good news for the newspapers pursing an online only strategy. [I must say I was surprised to see that the New York Times generates $100 million a year in online display ads, as reported by the Wall Street Journal.] This also offers a glimmer of hope for AOL as it works through its transition.

What is surprising is that radio advertising is only expected to decline 2.5% in 2010 following a 21% decline in 2009. I wrote previously that radio has probably seen trough levels and that the worse of the secular decline is behind them.

Newspapers is expected to continue to fare worse than other mediums with advertising spend declines of 10.7% on the back of a 27.2% decline in 2009, the worse of any of the ad mediums.

Local TV advertising, including local cable, is expected to decline 1% in 2010 following a 20.2% decline in 2009.

Outdoor advertising is expected to remain flat in 2010 following a 14.8% decline in 2009

National TV, which includes cable, broadcast, and syndication, is expected to increase 6.2% in 2009, driven mostly by cable, which is expected to grow 9.1%. The medium experiences declines of 3.6% in 2009.




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Apple - Our Top Tech Pick for 2010

Apple (APPL) is likely to have a strong 2010 driven by the forthcoming iTablet, expansion of the iPhone platform through Verizon, firmer iPhone sales in Europe and China, strong Mac unit sales, and better than expected iPod sales, which although declining, should be boosted by the Nano. In addition, Apple is likely to split the stock this year.

According to the Financial Times, Apple is scheduled to make a major announcement on January 26, and the wisdom is that they will announce a tablet device and major upgrades to their iTunes functionality including print media support (competition for Kindle) and gaming support.

The Tablet, we believe, will retail for approximately $600 and Apple could sell 1.5 million incremental units, meaning without cannibalization of existing products. That's an incremental $900 million in revenues and at a 35% margin, an extra 20 cents to earnings. We would be buying the stock into January 26 and then take some profits on the day of the announcement.

We think competition from Google in 2010 will be relatively muted but acknowledge that Google could become an issue a few years out. For that matter, Google will be an issue for most Tech companies in the next few years - Google is the proverbial elephant in the room. Google is still our favorite Tech company but we believe Apple's stock price could likely outperform Google this year. See more on Google at tmtanalyst.com. We also like Microsoft.






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