Citi
has
identified
S4
Capital
,
a
U.K.-headquartered
digital
advertising
and
marketing
services
company,
as
a
high-risk
but
potentially
attractive
investment
opportunity.
Despite
the
company’s
recent
struggles
and
a
challenging
short-term
outlook,
the
Wall
Street
bank
believes
that
S4
Capital’s
stock
could
see
a
significant
upside
of
280%,
with
a
price
target
of
230
pence.
U.K.
shares
are
generally
priced
in
pence,
with
100
pence
equal
to
one
British
pound
($1.27).
S4
Capital’s
stock
is
also
traded
over
the
counter
in
the
United
States.
Founded
by
advertising
industry
veteran
Martin
Sorrell,
S4
Capital
has
faced
a
difficult
year
in
2023,
with
core
earnings
falling
by
25%
on
the
back
of
reduced
spending
from
its
tech-heavy
client
base
and
a
slowdown
in
new
business
wins.
The
company’s
like-for-like
net
revenue
dropped
by
4.5%
to
£873.2
million,
while
earnings
declined
by
24.6%
to
£93.7
million,
resulting
in
a
margin
squeeze
from
13.9%
in
2022
to
10.7%
in
2023.
The
company
has
reportedly
been
the
subject
of
takeover
interest
recently,
partly
due
to
its
flailing
share
price.
The
rejected-acquisition
interest,
revealed
by
The
Wall
Street
Journal
last
month,
appears
to
have
stemmed
the
downward
spiral
for
the
stock.
While
shares
are
up
nearly
15%
this
year,
the
stock
has
declined
by
60%
over
the
past
12
months.
SFOR-GB
1Y
line
The
company
has
said
it
also
expects
continued
pressure
on
the
top
line
and
a
broadly
similar
outcome
for
the
bottom
line
in
2024.
Despite
the
cautious
outlook,
Citi
analysts
see
potential
for
the
business
to
rebound
in
the
medium
term.
The
investment
bank’s
analysts
highlighted
that
while
the
short-term
outlook
remains
cloudy,
“there
is
potentially
still
a
lot
to
stay
excited
about
medium
term.”
“Specifically,
we
think
the
group
will
be
well
placed
to
re-accelerate
once
the
tech
sector
stabilises
and
project-based
work
picks
up
as
our
[Chief
Marketing
Officer’s]
survey
suggests
it
will,”
said
Citi
analysts
led
by
Thomas
Singlehurst,
in
a
note
to
clients
on
March
28.
Citi
said
that
investors
who
can
afford
to
take
a
12-month
view
consider
the
risk-reward
profile
of
the
stock,
which
they
believe
continues
to
look
“attractive.”
As
a
result,
Citi
said
S4
Capital
is
a
“Buy”
rated
stock
with
a
“High
Risk”
designation
and
a
price
target
of
230
pence.
The
stock
has
a
consensus
price
target
of
£0.70,
representing
a
potential
upside
of
14%.