On Thursday, Stagwell Inc. (NASDAQ:STGW) shares saw its price target increased by Benchmark to $9.00, up from the previous $6.50, while the firm maintained a Buy rating on the stock.
The company's first-quarter results and forward-looking statements indicate a significant turnaround in technology expenditure, hinting at a broad-based rebound in customer demand. The expectation is for a continued recovery throughout the year 2024.
Stagwell reported a record net new business momentum, with $66 million in the first quarter and $284 million over the trailing twelve months. The company's guidance for 2024 implies a dynamic uptick in digital transformation acceleration toward the year's end, with growth expectations considered attainable post-first-quarter performance. Stagwell's participation in a global pitch, potentially worth $40 to $60 million, marks a significant step for the company, showcasing its expanding competitive edge.
The firm's current international revenue exposure stands at a mere 12% outside the United States and the United Kingdom, indicating a substantial opportunity for international growth in the near term and beyond.
Stagwell plans to capitalize on this by pursuing targeted mergers and acquisitions in 2024, aiming to lower its net leverage to around 2.5 times by the end of the year. This strategy is expected to unlock additional growth potential from existing clients, particularly as global contracts with large multinational corporations often allocate around 50% to the U.S. market.
Furthermore, Stagwell's Advocacy segment performed beyond internal expectations in the first quarter, signaling a potentially record year for this part of the business. The reiterated guidance suggests that the company's overall revenue projections for 2024 might be on the conservative side.
Benchmark's updated price target reflects an improved outlook for Stagwell's fundamentals and an elevated exit EBITDA multiple assumption, increased to 7.0 times from the previous 6.0 times.
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