What happened
Shares of Stagwell (STGW -2.06%) are up 11.5% as of 3:45 p.m. ET Friday after Craig-Hallum analyst Jason Bagwell initiated coverage on the marketing and communications company with a buy rating.
So what
In a note to clients Friday morning, Craig-Hallum analyst Jason Kreyer assigned a buy rating to Stagwell with an $8-per-share price target on the stock -- a 76% premium from Stagwell's current price of around $4.56 per share even after today's pop. Kreyer elaborated that Stagwell appears to be "poised for upside with unprecedented opportunities forthcoming."
Kreyer isn't alone in this thinking. Earlier this year, Goldman Sachs' Brett Feldman argued Stagwell is positioned to benefit from longer-term secular-growth trends and marketing spending, with potential for accelerated organic growth relative to the broader market given its low market share and its digital-first approach.
Now what
Even so, Stagwell has been slow to deliver on that potential in recent quarters. When the company released second-quarter 2023 results in August, shares plunged as it lowered its full-year outlook to call for modest organic growth ranging from flat to 2%. At the time, management blamed headwinds from economic uncertainty as well as reorganizations in certain tech-centric clients that they believe should prove temporary.
At the same time, this is a young company that was only founded in 2015 and already commands a respectable 2% share of the global advertising and services market.
As Stagwell steadily builds its international presence -- where it currently generates around 20% of total sales -- it should have a much easier time continuing to take market share from incumbent marketing companies by chasing larger global contracts.
