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It won't happen with Stagwell IMO; they are in exactly the same position with 2023 profits falling 16%. This is about sentiment now; SMS needs to get back market trust. The prey in this market are the old school network agencies (WPP etc) who are madly scrambling to reinvent themselves. SMS and the team totally dropped the operational ball and need to fix that but there is still a big space for a disruptive ad & tech partner.
The margins are poor. They need to lose significant numbers of people in that practice, win more deals, leverage technology more effectively and stop all the non-core nonsense. Until this happens they look just like any other network agency.
Https://www.adweek.com/media/presenting-adweeks-inaugural-ai-awards/
Https://www.campaignasia.com/article/stagwell-lowers-guidance-projects-negative-growth-for-2023/492511
Not just S4. Hugely oversold; market is tough but these guys are well positioned.
I have a significant holding and will not be rushing to sell. Yes, I am extremely disappointed and professionally surprised at how low the share is. As I've mentioned before I compete against these guys and I know they are still winning. The macro environment is dragging them down but this is dropping further due to speculations on SMS's health, who's the successor, the audit screwup and a general uncertain "smell." With 40% of stock held by the owners it also seems the thin volumes that drove it up are now driving it down. However I think they are nearly through the debt, make a wad of cash in the US and have built a new adco model that only really accenture have scaled further. My guess: macro sentiment will one day swing back to the positive and people will notice the cash it's spinning off, the disappearing debt and the growing revenues and come back on board. The board needs to keep quietly addressing optics, trim the fat within the business, continue to scale processes, keep winning and then it we be a riser again. IMO.
Jellyfish have a thin profit margin although great people and a good business machine. Too much overlap with S4. As has been said this share slump is now all about optics and Sorrell's health and nothing to do with the fundamentals of the business. We lost a deal against them a few weeks back so I can assure you they are still winning!
The market is sound, people still need digital communication strategies and storytelling. And it's still ripe for disruption and this is still a 70%+ US play. Just have to sit on our hands for a bit; it went too high and now it's gone too low. Plus ca change.
It's way oversold. They are still winning deals, there is a decent team in place, marketing and advertising isn't going anywhere, the numbers are going in the right direction etc. I don't think this drop is about fundamentals but about optics; who is going to lead as SMS steps back. Hire or promote a clear no 2, stick to your guns and crack on. It shouldn't be £8 but neither should it be £1.
A personal view from inside the industry but all these layoffs (and more to come) by Google & Meta etc are great for service partners and consultants like S4. As the techs drive towards margin someone has to pick up the released service & integration work. And even if it's the client deciding to get more control and in-house, MediaMonks are the leader in in-housing. IMO it's set up really well to flourish.
https://www.cnbc.com/video/2023/01/19/sorrell-meta-will-rebound-extremely-strongly.html
All seems well placed to me.
- Lower funnel advertising is media that addresses the demand, answers a specific interest. Think search, social, analytics, display retargeting, email/CRM, cloud modelling, etc. It's direct response and very focused on measurables and ROI.
- Upper funnel is branding; where you are trying to build a profile/position. Think TV, digital display, PR etc. Less about ROI and more about perception, NPS etc
The idea is you move someone through the funnel with an early media mix that gets them interested and then a late stage media mix that closes. MM are perfectly placed for the latter, which in a downturn is what marketers care about.
(Work in the space)
Q4 will be even better. Contrary to what many think digital marketing is not going away; look at how younger generations live their lives online. Brands will always need to reach these people and although the big media companies are having a rougher time than many expected 12m ago, in the scheme of things their progress is just dropping from "amazing" to "great." They are still making money and delivering what consumers want. And in a recession digital is the very last channel to be cut.
The shorts have to unwind their positions plus most SFOR stock is still sat with owners and big institutions so small trades move the number. The business has it's affairs in order, has accepted it needs to show jam today as well as jam tomorrow and is still flying. We just have to wait; when market sentiment turns this is a decent growth stock to own IMO.
210,000! I thought I had a lot!
Well fingers crossed Monday goes well. All they need to do is demonstrate competence and control of the balance sheet and sentiment will change; if they also show rev growth and ebit progress then it will bounce IMO.
But honestly I have no idea why it isn't higher already; it's priced at distressed levels and the drop was hugely overdone. 2X revs would still be a great price right now IMO.
I understand they have been trimming the global workforce for the last quarter as well as the publicised hiring slow so I would expect to see a better ebit as well as continued revenue growth for the next two quarters.
I know they lost market faith with their reporting and the tech sector has slumped in general, but I can't for the life of me work out why it's trading so cheaply. Everyone rushed in and then panicked out. Digital advertising is growing and S4 is well placed for this; even if it was just an also-ran the price is still cheap. I own a decent chunk now so I could look stupid in six months!
Hi bigapple,
What makes S4 exciting is they are taking the elements of digital content creation, asset production and ideation - i.e. the "storytelling" - and injecting it/fusing it with the granular data-driven methodology evinced by the data and analytics functions, the performance marketing/programmatic teams, econometrics, audience strategists etc. Usually this is done across multiple suppliers; there is no other company apart from accenture interactive that can get close to this end-to-end model. Basically they are forcing/enabling CMOs to think in the round and properly tie data, performance, measurement and creative in one place.
All big agencies and consultancies are trying to head this way but it's v tricky with multiple P&Ls and siloed teams. S4 have a massive head start.
IMO.
FWIW I'm now very "in." They keep winning business and growing clients and the rest of the market is trying to copy them. They have some PR issues that need sorting yes and I don't see £8 any time soon, but this is too cheap. Digital marketing does well in a downturn; it's TV and the non-performance stuff that suffers. And 70% of earnings US. I must be missing something as this looks good to me.
I know a little bit about these guys. They hired ahead of the curve and were still in full growth mode whilst the market moved on and cared more about margin. They're still winning business and look to be hitting growth targets. I think the rest of 2022 will be catch up, improve the margin a bit and quietly restore credibility, but I expect these numbers to be ok.
Am I being simplistic? If the cost of the average employee in digital marketing is say £50k, S4 could close the £30M gap by losing just 600 people out of a workforce of 9,000+ and driving efficiencies. With a hiring pause this gap soon disappears.
The efficiencies of mashing together 30 companies with all the employee overlap will begin to show through - it doesn't happen overnight. I'm in this space and this is a massive oversell IMO.