Is the technology sector bouncing back? The tech-heavy Nasdaq Composite Index (.IXIC) is up 31% this year, and chip designer Arm enjoyed a 25% first-day pop on its listing. But results from S4 Capital (SFOR.L), the ad services group set up by Martin Sorrell, suggest the sector as a whole is not quite as cheery as some of its investors.
S4 on Monday downgraded its 2023 like-for-like net revenue growth forecast to “down on last year”. That’s not entirely surprising: the 410 million pound group makes around half its revenue from clients in the technology sector, and many tech companies, despite the boom enjoyed by AI-focused groups like Nvidia (NVDA.O), have been cutting costs to cope with an economic slowdown. Facebook owner Meta Platforms (META.O), for example, trimmed its marketing and sales expenses by 10% year-on-year in the first six months of 2023.
The news still sent S4 shares down 25% on Monday morning. What’s more concerning than the decline is the lack of predictability: Sorrell’s group announced a 2%-4% revenue growth target as recently as July. S4 shares are now down over 90% since their peak in September 2021, and it is now valued including debt at around 0.6 times 2022’s net revenue, less than half the multiple of peer Publicis (PUBP.PA). Any recovery will require Sorrell to show he can keep winning business in an era of tech uncertainty. (By Oliver Taslic)
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