Some of our younger readers are likely familiar with its wildly popular social media brands Lad Bible and Unilad. What began as a few college students sharing memes on social media has grown to become a fully-fledged media empire.

According to the group’s website, it’s “the world’s all-time most viewed and engaged publisher on Facebook” and “the biggest publisher on TikTok.”

But is there a lasting future in social media memes?

Price struggles

Like many early-stage penny stocks, LBG’s shares have dropped significantly since listing at 200p in late 2022. Now trading at just 35p, they’re down almost 83%.

That doesn’t scream investor confidence, yet analysts estimate the current price is 72.5% below fair value. So could this be a once-in-a-decade opportunity for investors willing to take a risk?

Impressive stats

From a numbers point of view, there’s certainly a strong argument for LBG’s future success. It enjoyed earnings growth of 42% over the past year and is expected to grow at 11.23% a year going forward.

As a micro-cap, it isn’t well-covered by analysts — but those that do follow it are bullish. All four I surveyed gave it a Strong Buy rating, with an average 12-month price target of 115p. That’s a massive 227.6% increase from today’s price!

Is that a bit optimistic? Maybe, but its surging popularity shouldn’t be overlooked. Since incorporating, the business has launched a swathe of new brands, including:

• UniLad Tech
• Betches
• Sport Bible
• Odds Bible
• Food Bible

It now has offices in London, Manchester, Dublin and New York.

Fair to say, the fledgling social media meme account has grown to become a thriving global entertainment powerhouse. But as we all know, penny stocks are inherently risky. So what should potential investors be aware of?

Platform dependency

LBG’s main risks are its dependence on advertising demand, platform-driven revenue, and AIM-listed volatility. It also carries the usual penny stock risks of lower liquidity and wider bid-ask spreads, which can make it harder to buy or sell at a good price.

Even though FY25 showed revenue growth, it’s still in a scaling phase and is investing heavily in the US, leadership hires, and acquisitions such as Betches Media.

That creates execution risk: growth plans can take longer than expected, cost more than planned, or fail to convert into sustained margins and cash flow.

The bottom line

Even the most promising growth stories can be derailed unexpectedly, particularly if they have third-party dependency. That’s likely one reason why LBG’s shifting toward a more ‘direct relationship’ model. This could help it avoid platform disruption, particularly regarding Meta‘s recent changes to advertising and privacy. Only time will tell how this pans out.

Overall, I still think it’s one of the most exciting penny stock’s on the UK market right now. For those who can stomach some volatility risk, I think it’s worth considering as a small allocation.

Mark Hartley has no positions in the shares mentioned. The Twelfth Magpie has no positions in the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor and Hidden Winners.

The post Here’s how this 35p penny stock became the fifth-largest social media business in the UK — and it’s just getting started appeared first on The Twelfth Magpie.

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.

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