What happened
Next-generation marketing company Stagwell (STGW -2.06%) was a double-digit winner of a stock on Monday. After getting a serious boost from an analyst at a prominent investment bank, investors piled into the shares, to the point where they closed the day nearly 11% higher in price. That was more than good enough to trounce the S&P 500 index's 0.4% increase.
So what
That prognosticating investment bank was none other than Goldman Sachs. Analyst Brett Feldman initiated coverage of Stagwell stock with an unhesitant buy recommendation, at a price target of $12 per share. That implies a very substantial potential upside of 46% on its current price.
In his view, Stagwell is in a fine position to reap the benefits of a rise in the popularity of cutting-edge advertising solutions. He wrote that the company "is well positioned to benefit from long-term secular growth in global digital advertising and marketing spend."
The prognosticator also feels that, compared to traditional advertising agencies, Stagwell has a higher proportion of revenue from digital ads. It also benefits from its currently low market share, as well as the faster organic top-line growth that often accompanies that.
Now what
Additionally, Feldman believes that Stagwell has a strong balance sheet and robust cash flow, which gives it opportunities to grow by acquisition, should it choose to do so.
He added that dealmaking might be a good lever to pull, as the company is "well positioned to compete for large customer contracts in the U.S., but still lacking sufficient international scale to compete for materially larger ($100 million-plus) global contracts."
