Tullo Still Overweight On MDC Partners; CEO Departure Could Give 40-60% Upside

In a report issued Wednesday, Albert Fried & Company’s Director of Research, Rich Tullo, took a look at MDC Partners Inc MDCA. While speculative, the analyst thinks the stock is in play with 40 percent to 60 percent upside potential, following the departure of the company’s CEO.

He reiterated an Overweight rating and $27.00 price target on shares.

According to the note, “MDCA is the Ad Agency holding company most heavily weighted to interactive advertising” (about 60 percent of revenue, management said recently). This positions the company to benefit considerably from the growth in Mobile Apps Internet sites as advertisers resort to MDC’s agencies for marketing solutions on the Web and mobile platforms.

The firm expects MDC to increase its revenue at a faster pace than its peer group, with its agencies snatching market share from larger competitors and advertisers turning to MDC’s award winning agencies –like CP+B, 72 and Sunny and Anomaly- for creative marketing solutions.

Analysts at Albert Fried point out a few more levers relevant to their investment thesis:

• MDC’s long-standing CEO Miles Nadal resigned from his position last Tuesday because of an SEC investigation and what the firm believes are compensation related matters.
• The departure of Nadal, however, could be a “positive catalyst for the shares,” as his relation with the Board seemed conflicted.
• The appointment of Scott Kaufman as the new CEO looks like a good move.
• In the near term, MDC’s stock could surge 5 to 10 percent on the CEO departure news.
• “Earnings will be reported on August 6, 2015 and the Company reaffirmed guidance; thus we think this may be a 40% to 60% upside buying opportunity."