Investing.com -- Goldman Sachs has initiated coverage of Havas (AS:HAVAS) with a “buy” rating and a 12-month price target of €1.9, implying roughly 31% upside, in a note dated Friday.
The brokerage cited an attractive risk-reward profile, underpinned by discounted valuation, resilient earnings outlook, and a strong balance sheet.
Shares of Havas trade at 6.5 times 2026 estimated earnings, a 31% discount to the average for the five largest global ad agencies.
The stock offers a 13% free cash flow yield, compared to 11.7% for peers. The brokerage believes its earnings risk is limited due to several structural factors, such as a lower U.S. exposure, a high health care revenue share, a client base with a high proportion of local and regional companies, and ongoing net new business growth.
In terms of net cash/EBITDA, excluding leases, the company had a ratio of 0.5x at the end of 2024.
Analysts expect Havas to deliver medium-term EPS growth ahead of peers, projecting a compound annual growth rate of 13% from 2024 to 2028, compared to 8% for the group.
This is driven by projected margin expansion, M&A activity and buybacks, the latter of which are assumed to begin in the second half of 2025.
Havas has the lowest adjusted EBIT margin among global peers at 12.4% in 2024, versus 16.1% for the peer group.
However, Goldman forecasts 210 basis points of margin improvement over 2024–28, compared to 54 basis points for peers. Drivers include operational simplification, restructuring of underperforming creative units, and a business mix shift toward higher-margin areas.
The analysts note Havas has historically shown stronger margin resilience in downturns, with lower revenue-to-EBIT drop-throughs in 2009 and 2012.
Goldman said Havas’s revenue is positioned to be more resilient than peers’ due to its business mix.
Only 34% of its revenue is from North America, the lowest among top global agencies, while 29% comes from health care, 10% from financial services, and 10% from consumer packaged goods.
Havas’s U.S. business leans more toward health and creative segments, with limited media exposure.
Though the company lost the Pfizer (NYSE:PFE) account in 2023, Goldman expects a modest positive net new business contribution in 2025.
While Havas’s smaller scale, particularly in U.S. media, may limit participation in some large pitches, it has tracked peers in organic growth since 2021 and is forecast to outperform in 2025 before returning to in-line growth from 2026.
Havas plans €50 million annually in M&A, which Goldman estimates could add 1.6 percentage points to yearly revenue growth.
A similarly sized annual buyback program would represent around 3% of the current market cap.