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3 Smart Stock Picks in the Wake of Platform X’s Ad Exodus

The list of companies that have stopped advertising on platform X (formerly known as Twitter) because Elon Musk endorsed an antisemitic post continues to grow. It’s become so long that you could construct an excellent portfolio from all the names abandoning the social media platform and its volatile billionaire owner.

Interestingly, most companies that have dropped ads from X use corporate speak to avoid calling Musk an outright racist, which remains debatable. I think he enjoys stirring the pot, much like Donald Trump. What these two men actually believe, I doubt anyone will ever know. 

The latest large-cap stock to drop X was Walmart (NYSE:WMT), which dropped the platform from its advertising plan on Dec. 1.  

“We aren’t advertising on X as we’ve found other platforms to better reach our customers,” a Walmart spokesperson said.

According to media reports, the number of brands bailing on X is more than 100. Here are three smart stock picks from the carnage Musk created by his lonesome.

Microsoft (MSFT) 

Source: The Art of Pics / Shutterstock.com

According to The New York Times, Microsoft (NASDAQ:MSFT) pulling its ads from X could be worth more than $4 million in lost revenue to Musk. That might not seem like a lot, given the billionaire paid $44 billion for the platform formerly known as Twitter.

However, in 2022, X generated $4.4 billion in revenue, most of it from ads. At the end of November, the Times said the number of brands leaving the platform was more than 200. $2 million per advertiser is $400 million in lost revenue or about 10% of its annual sales.

X CEO Linda Yaccarino tried to convince customers Musk’s views on free speech were something to get behind. After what happened to Bud Light this past summer, there is no way any CEO is going anywhere near X. That would be career suicide.

“It doesn’t resonate at all,” Ruben Schreurs, the chief strategy officer at Ebiquity, a marketing and media consulting firm said, The Times reported. Schreurs added that the spending pauses seemed to be “turning into a termination of advertising on X.” 

Only Musk’s sale of the platform will get these brands back.

As for Microsoft, there is no way it has any appetite for mixing it up with Elon Musk. After going through a stressful couple of weeks with OpenAI, it can find plenty of places to spend $4 million in ad revenue.     

Netflix (NFLX)

Source: TY Lim / Shutterstock.com

According to The Times, Netflix (NASDAQ:NFLX), pulled $3 million in ads. The paper doesn’t specify over what period. However, assuming 90% of X’s $4.4 billion in 2022 revenue was for ads, daily ad spending on the platform exceeds an estimated $10.8 million.

The revenue damage becomes far more real annualized over a year. According to Statista, Netflix spent $1.59 billion in 2022 on advertising expenses. That was down slightly from $1.67 billion a year earlier. Since 2014, the most it’s ever spent was in 2019, when it dished out $1.88 billion.

If Netflix spent $3 million per week on X, which is hard to imagine, Elon Musk’s proverbial goose is undoubtedly cooked.

Even if $3 million per week were accurate, Netflix has ad-supported plans to grow. It can use the money not spent on X to reinvest in its ad business. To me, and probably to Netflix shareholders, that is a much better return on investment.

Elon’s loss is Netflix’s gain.  

Airbnb (ABNB)

Source: Kaspars Grinvalds / Shutterstock

The last of the three is Airbnb (NASDAQ:ABNB). It’s reported to have pulled $1 million in ads from X. 

The optics of a service such as Airbnb supporting the rantings of a madman would upset not only its users but also its hosts, which drive the company’s revenues. Airbnb doesn’t exist without its hosts. CEO and co-founder Brian Chesky knows this firsthand because he was the company’s first host.

Today, more than four million hosts provide over seven million listings in 220+ countries. Sure, you also have to have guests, but if they didn’t stay at an Airbnb, they’d stay at a hotel or resort or sleep in a tent at a campground. Inventory is critical to the business. 

Interestingly, co-founder Joe Gebbia serves on Tesla’s (NASDAQ:TSLA) board, which he joined in 2022. That would be an awkward conversation at the next Tesla board meeting. Hopefully, Musk doesn’t use the exact words he did with Walt Disney (NYSE:DIS) CEO Bob Iger. At least, in Iger’s case, he wasn’t in the room.

Of these three names, Airbnb had the biggest reason to pull their ads. It isn’t an excellent look to support an alleged racist when you’re selling an inclusive type of experience. 

I continue to like ABNB stock.   

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.

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