Stock of the day: oOh!media
oOh!media, Australia's largest outdoor media company, faces tough market conditions and shifting trends, leading to a $15 million cost-cut and downgraded earnings expectations.
(AI video summary)
This video was created on 12 December for IG audiences by ausbiz.
ASX code: OML
oOh!media's financial challenges in outdoor advertising
oOh!media, Australia's largest outdoor media company, is facing challenging trading conditions. This has prompted the company to cut costs by at least $15 million.
The company has downgraded its fourth-quarter (Q4) revenue growth and expects underlying earnings for the 2024 calendar year to be between $125 million and $128 million. This is a stark contrast to the broader market's growth, which has been stronger.
Management has acknowledged market share losses, reflecting the difficulties in the outdoor advertising sector.
Structural changes in advertising spend
The shift towards digital and targeted advertising is impacting traditional outdoor advertising. Companies like Nine Entertainment and other multi-channel platforms are capturing advertising spend by offering measurable returns on investment through digital channels such as Google and social media ads.
In contrast, outdoor advertising lacks quantifiable metrics, making it less appealing to management teams that prefer precise control over advertising spend. This structural change presents a significant headwind for oOh!media, despite management's efforts to adapt.
Future outlook and strategic initiatives
Despite the challenges, there is still a place for outdoor advertising, particularly with innovations like remote billboard updates and potential data collection improvements. However, oOh!media's share price has declined, reflecting the current market sentiment.
Investors are urged to be cautious, as the company may face further difficulties if economic conditions worsen. While outdoor advertising might see an uplift during economic booms, potential recession risks make it a less attractive investment at present.
As a result, analysts suggest selling the stock, as it is better to keep oOh!media on a watchlist until conditions improve.
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