Shares in Sir Martin Sorrell’s S4 Capital PLC (LSE:SFOR) hit an all-time low after the digital marketing group announced that its 2024 earnings and revenue would fall below expectations.
Citing reduced spending by technology clients due to challenging economic conditions and high interest rates, Sorrell committed to cutting costs as it grapples with lowered revenue projections, including significant staff reductions.
In its latest update, S4 reported a 19.3% revenue drop to £198.4 million in the third quarter.
In morning trading, the shares fell 9% to 35.80p.
Peel Hunt said it would be cutting its earnings (EBITDA) forecast by 4-6%, mirroring guidance given by S4.
It added: "Market conditions remain challenging for S4, with tech client spending yet to recover and a continued challenging backdrop for digital transformation.
"Despite ongoing top-line headwinds, the company is taking appropriate measures to cut costs and its AI initiatives are gaining traction, which is supportive of new business wins."
Jefferies, meanwhile, maintains that the stock's valuation remains attractive, noting a projected FY25 free cash flow yield of 25% compared to peers at 9%, with a revised price target of 50p, implying a 26% upside.