One growth stock I’m currently considering for my holdings is LBG Media (LSE:LBG). Should I buy or avoid the shares?
Digital content and advertising
LBG is a multi-brand, multi-channel youth publisher in the digital media and publishing sector. It owns 10 specialist brands and uses social media platforms such as Facebook, Instagram, Snapchat, Twitter, and Tik Tok to drive engagement and reach new audiences through shareable videos and entertainment news. It makes money through its model of blended advertising, which includes on-site, branded content and third-party platform ads.
LBG Media shares floated on the FTSE AIM in December at 175p via an initial public offering (IPO). The shares reached close to 200p on the first day. They have since pulled back slightly and are currently trading for 169p.
A growth stock with risks
LBG shares do come with risk, in my opinion. The digital publishing and content sector has seen huge growth in recent years. This has led to intense competition in the marketplace. All the incumbents in this space are jostling for clicks, engagement, and views from their audience to drive revenue and profit. Some of these competitors include Buzzfeed, Vice, and Mashable.
Another issue with LBG shares may be that seeing a return on my investment could take a long time. LBG said it would not be paying a dividend for now as it will be reinvesting profit towards growth. This is a common characteristic of a growth stock.
Why I like LBG Media
I believe digital media and publishing is one of the best growth sectors currently. In 2021, digital advertising spending was £336bn. This is forecast to grow by 12% until 2042. LBG is well placed to benefit from this boom, in my opinion. It should be able to leverage its position and presence towards further growth and potential returns for shareholders.
This leads me on to my next point, which is LBG’s target demographic. LBG’s content is primarily designed to reach a young audience, between the ages of 18 and 34. I believe this is key as this demographic is a huge part of the adoption of social media and the way in which people engage with each other, with businesses, and to obtain information and content.
Finally, LBG recently published full-year results for the year ending 31 December 2021. Total group revenue came in at £54.5m, up 81% from 2020 levels. Profit before tax increased by 98% from £4.1m in 2020, to £8.1m in 2021. Cash reserves increased from the proceeds from the IPO. Its global audience grew by 31m to more than 264m during the year with a total of 63bn content views per annum. This is up 97% compared to 2020.
A growth stock I’d buy
I’m always on the lookout for small-cap gems that have the potential to provide my portfolio with lucrative returns. I think LBG is an exciting growth stock. I would add a small number of shares to my holdings currently. My investing mantra has always been to buy and hold for the long term. I believe I will see a positive return on investment in the longer term through LBG shares.