Opinions
Jennifer Radman
Omnicom Group
OMC-N
TOP PICK
Feb 19, 2016
Stock price when the opinion was issued
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An oligopoly. There is only a handful of large advertising companies that have the ability and the global scale to deal with Fortune 500 companies, and this is one of them. His favourite thing is that it has a 10% free cash flow yield. They make a lot of money. The concerns that overhang the valuation, that entrance like Google and Facebook will eventually take their business away, are overblown, because 75% of media buyers still rely on advertising agencies to create the content it contains. Dividend yield of 2.7%. (Analysts’ price target is $84.50.)
Two of the largest advertising companies in the US just paired up under the OMC name in a $13.2 billion all stock deal. The new entity will represent 48% of ad revenue and OMC management expects $750 million in annual cost savings. It trades at 13x earnings and supports a ROE of 33%. We recommend setting a stop-loss at $80, looking to achieve $116 -- upside potential of 28%. Yield 3.0%
(Analysts’ price target is $116.02)
Largest advertising and communications agency in the US. Essentially has a network of agencies that they work with. They are seeing strong demand. Even in Asia where there has been weakness, they have had double digit growth in revenue. It’s a matter of helping companies solve complexities. Dividend yield of 2.62%.