Outfront Media stock target cut to $18 at TD Cowen

On Wednesday, TD Cowen’s Lance Vitanza adjusted the price target for Outfront Media (NYSE: NYSE:OUT) to $18.00, a decrease from the previous $20.00, while maintaining a Hold rating on the stock. Currently trading at $16.21, with a market capitalization of $2.71 billion, the stock shows significant volatility with a beta of 1.84. Vitanza’s decision is based on several factors affecting the company’s outlook, including contract losses and the current uncertain economic climate. According to InvestingPro analysis, the stock appears slightly overvalued at current levels.

Vitanza noted that while digital and programmatic segments showed robust growth, the impact of contract forfeitures, particularly in New York, was greater than anticipated. The situation was compounded by Outfront Media’s planned departure from the Los Angeles contract in mid-second quarter, along with a general lack of clarity due to broader macroeconomic conditions. These elements have led the analyst to revise downward the second quarter and second half financial estimates for the company.

Despite these challenges, Outfront Media’s digital revenue has seen a year-over-year increase of 7%, now representing 32.4% of the company’s total revenue, up from 29.3% the previous year. The programmatic and automated channels have also experienced significant growth, nearly 20% year-over-year, and now account for 16% of digital revenue, an increase from 14.5% a year prior. InvestingPro data reveals the company maintains a healthy gross profit margin of 48.62% and offers an attractive dividend yield of 7.23%, making it one of the higher-yielding stocks in its sector.

Vitanza expressed a positive view on the momentum and strength in the digital and programmatic areas. These segments are seen as advantageous due to their potential to generate higher-margin revenue and their alignment with the evolving preferences of advertisers, who are increasingly looking for targeted and measurable advertising tools.

The updated price target of $18 is based on a reduced forecast for fiscal year 2025 Adjusted OIBDA (Operating Income Before Depreciation and Amortization) while keeping an unchanged 11x multiple. This reflects the adjustments made by Vitanza in light of the recent developments within Outfront Media’s operational and market environment. The stock currently trades at a P/E ratio of 10.61, suggesting a relatively modest valuation multiple. For deeper insights into Outfront Media’s valuation metrics and growth potential, including 8 additional ProTips and comprehensive financial analysis, visit InvestingPro.

In other recent news, Outfront Media reported its Q1 2025 earnings, revealing a slight miss on both earnings per share (EPS) and revenue expectations. The company posted an EPS of -$0.14, which was below the anticipated -$0.09, and revenue reached $390.7 million, falling short of the expected $396.14 million. Despite these misses, Outfront Media maintained its dividend at $0.30 per share and saw a nearly 7% increase in digital revenue, which now accounts for 33% of total revenue. Analysts from Wells Fargo (NYSE:WFC) and Morgan Stanley (NYSE:MS) have shown interest in the company’s performance, particularly in light of its strategic focus on digital media and the impact of large billboard contract exits.

The company faced a 3% year-over-year decline in Adjusted OIBDA to $64 million but remains optimistic about achieving mid-single-digit growth in Adjusted Funds From Operations (AFFO) for the full year. Outfront Media expects Q2 revenue from billboards to be flat or slightly down, with transit revenue projected to increase by low to mid-single digits. CEO Nick Bryant emphasized the company’s digital-first strategy, aiming to leverage data integrations and ad tech partnerships to enhance campaign outcomes.

Outfront Media’s liquidity remains strong, with over $600 million committed, and it plans to continue modernizing its tech stack to drive efficiency. The company has also announced plans to exit another large, marginally profitable billboard contract in Los Angeles, aligning with its strategy to focus on more profitable ventures. Despite potential economic challenges, CFO Matthew Siegel expressed confidence in the company’s financial outlook, highlighting the absence of significant recession indicators.

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