AI And JourneyLab Will Drive Digital Marketing Revolution

Key Takeaways

• Rapid AI-driven transformation, bolstered by proprietary products and refocused operations, positions the company for stronger margins and accelerated international market share gains.
  
• High retention among clients and staff, with scalable digital solutions and disciplined capital strategy, drives stable earnings and the potential for sustained value creation.
  
• Exposure to client budget cuts, heavy reliance on major contracts, integration challenges, industry automation, and in-housing trends all threaten sustained revenue and margin stability.

Catalysts

Next 15 Group plc, together with its subsidiaries, customer insight, customer delivery, customer engagement, and business transformation services in the United Kingdom, Africa, the United States, Europe, Middle East, and Africa.

• Analyst consensus believes the integration of AI and new capabilities like JourneyLab will drive future revenue growth, but this likely understates the scale of transformation; Next 15's rapid deployment of proprietary AI-powered products positions it to materially outpace competitors, structurally shift to a higher-margin, subscription-based model, and unlock multiyear step-changes in both net margins and recurring revenues.
  
• While consensus highlights U.S. and European expansion as growth drivers, the deep operational refocus and demonstrated early client wins, especially via SMG in the U.S., signal Next 15 could capture leading share in the world's two largest addressable markets far faster than peers anticipate, driving a potential surge in revenue and international margin mix.
  
• The accelerating shift in client spend toward sophisticated digital, analytics, and multi-channel communications inflects directly to Next 15's strengths given recent investments in AI, data, synthetic personas, and always-on journey mapping-creating a uniquely defensible, highly scalable service portfolio that can sustain premium pricing and support both robust revenue and profit growth.
  
• The company's outstanding long-term customer retention-70% of top 100 clients retained for five years or more-coupled with industry-leading staff retention and a simplified operational structure, substantially decreases earnings volatility and enables compounding cross-sell and upsell opportunities, supporting stable and expanding earnings per share.
  
• Next 15's ongoing willingness to consider selective strategic divestitures, management incentive realignment, and a decisive, focused capital allocation strategy could rapidly crystallize hidden value, improve returns on invested capital, and accelerate overall earnings and cash flow growth for shareholders.

Next 15 Group Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Next 15 Group compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Next 15 Group's revenue will decrease by 11.4% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 5.4% today to 11.1% in 3 years time.
• The bullish analysts expect earnings to reach £56.6 million (and earnings per share of £0.51) by about July 2028, up from £39.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 13.3x on those 2028 earnings, up from 7.3x today. This future PE is greater than the current PE for the GB Media industry at 11.9x.
• Analysts expect the number of shares outstanding to grow by 1.08% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.74%, as per the Simply Wall St company report.

Next 15 Group Future Earnings Per Share Growth

Risks

• The company's exposure to ongoing macroeconomic uncertainty, especially client hesitancy due to unpredictable global events and changing government policies, increases the risk that client budgets for marketing and communications will be cut or deferred, which would negatively impact revenue and potentially earnings growth.
  
• Longstanding reliance on large contracts and client relationships-illustrated by the significant revenue impact from the loss of the Mach49 contract-creates vulnerability to further client losses or sector-specific downturns, leading to revenue volatility and margin compression over the long term.
  
• Structural integration challenges following multiple acquisitions and the ongoing process of business simplification introduce risks around operational efficiency and potential disruptions in service delivery, placing downward pressure on net margins if cost savings are not realized as expected.
  
• Accelerating adoption of automation and AI by clients and across the industry may reduce demand for traditional agency services, force fee compression, and favor large-scale, tech-centric competitors, harming revenue prospects and squeezing margins if Next 15's proprietary digital offerings fail to competitively scale.
  
• The trend for clients to bring content creation and digital campaign management in-house, as well as direct relationships with digital platforms, threatens to erode the addressable market for external agencies like Next 15, risking declining revenues and increased competition, which could also necessitate higher ongoing capital investment, thus affecting long-term profitability.

Valuation

• The assumed bullish price target for Next 15 Group is £5.8, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Next 15 Group's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of £5.8, and the most bearish reporting a price target of just £3.29.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be £508.1 million, earnings will come to £56.6 million, and it would be trading on a PE ratio of 13.3x, assuming you use a discount rate of 7.7%.
  
• Given the current share price of £2.86, the bullish analyst price target of £5.8 is 50.8% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.