Stagwell stock price target cut to $9.50 by Benchmark

Tuesday, Benchmark analysts revised the price target for Stagwell Inc. (NASDAQ:STGW) to $9.50 from the previous $10.00, while maintaining a Buy rating on the stock. Currently trading at $5.84, Stagwell’s stock shows significant potential upside according to InvestingPro analysis, which indicates the stock may be undervalued based on its Fair Value calculation. The adjustment comes ahead of the company’s first-quarter earnings report scheduled for Thursday, May 7, before the market opens.

The firm has adjusted its first quarter and full year 2025 earnings estimates for Stagwell due to macroeconomic uncertainties. While Benchmark’s expectations for the company’s 2025 total net revenue growth now sit slightly below Stagwell’s own target of over 8%, InvestingPro data shows the company achieved solid revenue growth of 12.4% in the last twelve months, with current EBITDA at $309.6 million. Additionally, the adjusted EBITDA for 2025 is projected to be conservatively set at $10 million below the lower end of Stagwell’s guidance range of $410 million to $450 million.

The revised model by Benchmark suggests a year-over-year margin expansion of 30 basis points in 2025, excluding Advocacy, which follows a 50 basis point contraction in 2024. This anticipated improvement is attributed to cost savings driven by automation. The analysts expressed a belief that their model accounts for more conservative margin assumptions, particularly in the company’s key growth segments like Digital Transformation, which may offer potential for outperformance. Recent financial metrics from InvestingPro show a gross profit margin of 35.1% and positive free cash flow yield of 8%, suggesting operational efficiency despite challenges.

In the upcoming earnings call, Benchmark anticipates updates on the 2025 growth assumptions for Stagwell’s Digital Transformation segment, as well as insights into first-quarter and current large tech client spending patterns. These details are expected to provide clarity on the potential for revenue acceleration in the second half of 2025. Furthermore, Benchmark seeks confirmation that the prevailing macroeconomic uncertainties have not negatively impacted the demand outlook for the incremental revenue from Stagwell’s Strategic Marketing Consulting (SMC) research in the latter half of the year.

The reiteration of the Buy rating by Benchmark reflects their continued positive stance on Stagwell’s stock, despite the lowered price target due to the revised earnings estimates.

In other recent news, Stagwell has announced its ambitious goal to achieve $5 billion in annual revenue by the end of 2029, as part of its "5 x 5" initiative. This plan also includes reaching $1 billion in adjusted EBITDA within the next five years without increasing debt ratios. On the financial front, Stagwell has secured an expanded credit facility with JPMorgan Chase (NYSE:JPM), increasing its revolving commitments by an additional $110 million, bringing the total to $750 million. This financial maneuver is aimed at enhancing the company’s financial flexibility and supporting its strategic initiatives.

In terms of acquisitions, Stagwell has acquired JetFuel, an agency specializing in experiential marketing, as part of its broader strategy to enhance its services. Benchmark analysts have maintained a Buy rating and a $10 price target for Stagwell shares, reflecting confidence in the company’s strategic plans and cost-saving initiatives. Additionally, John Kahan has been appointed as Stagwell’s first Chief AI Officer, bringing nearly 40 years of experience in data and artificial intelligence from companies like Microsoft (NASDAQ:MSFT) and IBM (NYSE:IBM).

Stagwell has also announced plans to streamline its operations by restructuring its business units and eliminating its two-class share structure. This move is expected to make the stock more appealing to additional indexes and funds. The company is further enhancing its data capabilities through partnerships with Palantir (NASDAQ:PLTR) and Adobe (NASDAQ:ADBE), integrating advanced data analysis and AI tools. These developments are part of Stagwell’s ongoing efforts to maintain its competitive edge in the marketing sector.

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