Stagwell Inc. (NASDAQ:STGW) was initiated with a Buy rating and a $12 price target at Goldman Sachs on Monday, representing a potential 62% upside.
Goldman analysts told investors in a note that the company is an emerging challenger in digital marketing transformation.
"STGW is well positioned to benefit from long-term secular growth in global digital advertising and marketing spend," wrote the analysts. "We expect STGW will continue to benefit from secular tailwinds to digital advertising spend, which we expect to outpace total advertising spend by LSD through 2026E (ex-US political), as companies continue to shift mix of advertising budgets towards digital mediums."
Goldman Sachs is constructive on STGW's long-term growth outlook due to its higher mix of digital revenues compared to traditional ad agency peers, low market share, and faster organic revenue growth compared to traditional ad agencies.
"Strong balance sheet and cash flow provide strategic and financial flexibility, including potentially accretive M&A. We see STGW as well positioned to compete for large customer contracts in the US, but still lacking sufficient international scale to compete for materially larger ($100mn+) global contracts," the analysts added. "As such, we expect STGW to sustain a robust M&A program, with an emphasis on expanding its international presence."