Analyst Note| Ali Mogharabi |
Interpublic reported second-quarter revenue and non-GAAP net income above our projections and FactSet consensus estimates, as the impact of COVID-19 on its clients’ ad spending was not as severe as we initially expected. The firm’s intangible asset moat source--its agencies’ brands--has successfully maintained clients and driven some account wins. However, while the firm saw improvement in ad spending in June, management remains uncertain about whether the second-quarter revenue decline was the bottom. Similar to its peers, IPG implemented some restructuring in response to the pandemic, which may make its operations a bit leaner next year. We increased our projections slightly but are maintaining our $24 fair value estimate. Narrow-moat IPG remains attractive as it continues to trade at only 0.77 times our fair value estimate. In addition, its dividend, which is currently yielding 5.5%, appears to be safe.