Stagwell: Solid Growth Story Remains Intact

seekingalpha11-20

Stagwell continues to demonstrate high single-digit growth, driven by strong new business wins and expanding digital transformation and marketing cloud segments.STGW's 3Q24 results showed 8.5% y/y net...

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nStagwell: Solid Growth Story Remains Intact\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-20 01:16 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4738710-stagwell-solid-growth-story-remains-intact><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Stagwell continues to demonstrate high single-digit growth, driven by strong new business wins and expanding digital transformation and marketing cloud segments.STGW's 3Q24 results showed 8.5% y/y net...</p>\n\n<a href=\"https://seekingalpha.com/article/4738710-stagwell-solid-growth-story-remains-intact\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4009","symbol_name":"广告","start_time":0,"source_url":"https://seekingalpha.com/article/4738710-stagwell-solid-growth-story-remains-intact","article_id":"2484978642","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1477194614/image_1477194614.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2484978642","pubTimestamp":1732036616,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Stagwell continues to demonstrate high single-digit growth, driven by strong new business wins and expanding digital transformation and marketing cloud segments.STGW's 3Q24 results showed 8.5% y/y net","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4009":"广告","STGW":"Stagwell Inc.","LU1169590202.USD":"ALLSPRING (LUX)  U.S. SELECT EQUITY \"I\" (USD) ACC","LU1169589451.USD":"ALLSPRING (LUX)  U.S. SELECT EQUITY \"A\" (USD) ACC"},"translate_title":"斯塔格威尔：稳健的增长故事仍然完好无损","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"STGW":0.9},"content_text":"Stagwell continues to demonstrate high single-digit growth, driven by strong new business wins and expanding digital transformation and marketing cloud segments.STGW's 3Q24 results showed 8.5% y/y net revenue growth, with significant contributions from Integrated Agencies, Brand Performance, and Communications Networks.Despite economic headwinds, STGW's robust client relationships and strategic acquisitions support a positive growth outlook, warranting a buy rating.   We Are  Summary I gave a buy rating to Stagwell (NASDAQ:STGW) in August, with my key thesis being that the business should continue to grow at high single-digit levels given the various growth drivers. As I expected, STGW has shown that it can grow at high single-digits, and with the solid growth momentum so far, I think the growth story remains intact. Earnings results update In the latest quarter (3Q24), reported on 7th November, STGW grew net revenue by 8.5% y/y to $580 million, in line with consensus estimates of $584 million. Driving the growth was Integrated Agencies Network net revenue of $324 million; Brand Performance Network net revenue of $157 million; Communications Network net revenue of $86 million; and all other net revenue of $13 million. This led to a total adj. EBITDA of $111 million, also in line with the consensus estimate of $109 million. Down at the bottom line, adj EPS came in at $0.22 vs. consensus estimate of $0.21. Growth momentum continues STGW growth momentum remains very solid, and this can be seen not only from revenue growth accelerating by 680 bps sequentially but also from various data points (as listed below) that should easily support STGW’s organic net revenue guidance of 5%-7%. Note that large account wins such as Adobe and General Motors are only realized as revenue starting in 4Q24, so 1-3Q25 should enjoy an easy comp base.  Net new business of $101 million in 3Q24, which drove the last twelve months net new business to a record high of $345 million. It is worth mentioning that the net new business growth momentum was fueled by new business pipeline and larger global pitches, rather than selling into existing customers. This suggests a more sustainable growth trajectory. STGW's largest new business win in its history occurred in 3Q24 with Adobe at 72andSunny and four other agencies, leading to a 32% y/y increase in the total number of wins in 3Q24. The number of wins with an average size of >$1 million also saw a 74% year-over-year growth. STGW also achieved notable success and growth with major clients like The Walt Disney Company, Microsoft, Google, and United.  STGW’s digital transformation organic revenue has also finally returned to growth in 3Q24 after several quarters of declines (3Q24 posted 14.5% y/y growth), driven by AI projects and 30% work expansion with tech companies. Demand should continue to be robust ahead as:  Rates have come down (the cost of doing business is lower), which should free up more resources for companies to invest in digital transformation Management expressed optimism about the growing tech pipeline, mentioning STGW's AI efforts to create apps, redesign user interfaces, and provide marketing solutions for the AI businesses of nearly all FAANG companies; and STGW has recently expanded its digital capabilities and global presence through a number of notable acquisitions: (1) BERA.AI, which will add brand management technology powered by AI; (2) LEADERS that enhances STGW social capabilities and provide it a global influencer tech platform; (3) Business Traveler that will help improve STGW’s travel media offerings globally; (4) Consulum, which STGW acquired 4Q24, will enhance its offering in the MENA region by adding a government advisory consultancy.  Stagwell Marketing Cloud growth outpaces the group Although this is still a small part of the business (10% as of 3Q24), it is the fastest growing segment. In the quarter, STGW reported Stagwell Marketing Cloud Group net revenue of $60 million, an increase of 25% y/y, driven by strength in travel, healthcare and retail customers. By revenue contribution, this segment contributed ~2.5% to overall net revenue growth (this is ~30% of the 8.5% y/y net revenue growth). Like the digital transformation segment, I am optimistic about this segment growth given that management has taken significant actions to improve its product offerings and expand its AI initiatives. One example is how the acquisition of BERA.AI has enhanced its appeal to financial analysts and marketers by allowing them to measure and account for the worth of a brand's reputation more effectively. Valuation   Source: Author's calculation Despite the achievements that STGW has reported so far, I believe the market continues to undervalue the stock. My updated model reflects the strong growth momentum that STGW is enjoying, in particular, the strong new business wins; deals with large clients; recovery in digital transformation growth; and the Stagwell Marketing Cloud adoption. Without taking an aggressive assumption on how much growth can accelerate, I believe it is increasingly likely that STGW can grow at a high single-digits percentage for the foreseeable future (I upgraded my growth outlook for FY25 and FY26 to 8% CAGR). As for margins, I still believe in the need for reinvestments, but I think it's fair to give credit that STGW should see some form of margin expansion as it wins larger deals. To reflect this, I adjusted my FY26 margin upwards by 100 bps. STGW trades at 7.5x forward EBITDA today, which I assumed it will continue to trade at, given this is the historical average. When compared to larger peers in the marketing field, such as the marketing agencies Interpublic Group (little to no expected growth for the next two years) and Omnicom Group (mid-single-digit expected growth), which trade at 7x and 8.5x forward EBITDA, respectively, I’d say STGW's 7.5x forward EBITDA for STGW that grows high single digits with margin expanding is not expensive. Investment Risk Although rates have come down, the Fed has recently signaled that they will tone down the pace of cuts. Depending on how much they “slow down” this process, it may keep rates elevated for longer than expected, limiting the “budget” that companies can free up for reinvestments. The multiple acquisitions that STGW has made to improve its digital capabilities are good, but if they cannot integrate well, it may result in a poor user experience that is detrimental to demand. Conclusion  My positive view on STGW is because the strong growth story remains intact. STGW delivered solid 3Q24 results, with accelerating revenue growth and impressive new business wins. Organic growth momentum is robust, fueled by strong client relationships, a recovering digital transformation segment, and the expanding Stagwell Marketing Cloud. While economic headwinds and integration risks exist, I believe the STGW growth outlook warrants a buy rating.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.4","shortVersion":"4.29.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2484978642"}