S4 Capital PLC (LSE:SFOR) shares are “way too cheap” as the market is already pricing the risk of a recession into the shares, reckons Barclays, even as it made significant downgrades to its forecasts and target price.
“Panic over,” the bank’s analysts said after S4C delivered its long delayed results, “more or less” in line with expectations.
Taking Sir Martin Sorrell’s explanation that issues regarding the timing of revenue and cost of sales recognition are being worked on to prevent a reoccurrence, the analysts said S4C “is back in business at a much cheaper valuation”.
The significant downgrades to the forecasts saw 28% taken off 2023 headline earnings per share, mostly from the analysts removing potential future mergers and acquisitions from its modelling, “which makes the story cleaner”.
On these new forecasts the shares trade at 17 times next year’s EPS and 14 times 2024’s, which “for 25%+ top line growth [is] way too cheap”.
“Yes, S4C is cyclical but is already pricing the risk of a recession at 77%,” the number crunchers said, adding that S4 is “among our most preferred names in European media”.
A rating of ‘overweight’ was reiterated with a new lower 550p target price.