Citi lifts Lamar Advertising stock rating to Buy, target to $19

Citi upgraded Lamar Advertising (LAMR) to a Buy rating with a new price target of $19, up from $17, citing a moderation of tariff risks previously weighing on the advertising sector. This positive revision coincides with Lamar's Q1 2025 earnings, which showed an EPS beat of $1.35 versus the $1.31 estimate, though revenue slightly missed expectations at $505.43 million against the anticipated $509.2 million; the company reaffirmed its full-year AFFO guidance and increased its stock buyback program by $150 million to $250 million.

Analysis

Citi analysts have upgraded Lamar Advertising (LAMR) to Buy from Neutral, increasing the price target to $19.00 from $17.00, primarily due to a reassessment of tariff risks now perceived as moderating within the advertising sector. This shift reflects a more optimistic outlook for the industry, prompting Citi to unwind previous conservative estimates. Lamar Advertising, with a market valuation of approximately $12 billion and a robust 67% gross margin over the last twelve months, recently reported Q1 2025 earnings per share (EPS) of $1.35, surpassing analysts' expectations of $1.31. However, its Q1 revenue of $505.43 million fell slightly short of the anticipated $509.2 million. Despite this revenue miss, the company maintained its full-year guidance for adjusted funds from operations (AFFO) and anticipates organic revenue growth of around 3% for the year. Lamar also declared a quarterly cash dividend of $1.55 per share, with a full-year distribution forecast of at least $6.20 per share, completed a $150 million stock repurchase, and increased its buyback program by an additional $150 million, raising available funds for future repurchases to $250 million. Growth drivers include a 4% increase in digital billboard revenue, which now accounts for 30% of total billboard revenue, and a nearly 30% growth in programmatic revenue. The company also completed 10 mergers and acquisitions worth $22 million in the first quarter. While InvestingPro analysis indicates the company appears overvalued at current levels, it also assigns Lamar a "GOOD" overall financial health rating.

Key Decisions for Investors

• Investors should evaluate the positive implications of Citi's upgrade and revised $19 price target, driven by moderated tariff risks, against Lamar's recent Q1 revenue shortfall and external analyses suggesting potential overvaluation despite its strong profitability.
• Consider the company's shareholder return initiatives, including a $1.55 quarterly dividend and an expanded $250 million share repurchase program, along with its demonstrated growth in digital (up 4%) and programmatic (up nearly 30%) advertising segments.
• Monitor Lamar's ability to achieve its reaffirmed full-year AFFO guidance and projected 3% organic revenue growth, as these will be key indicators of its performance in the context of the revised advertising sector outlook.