Ad Spending and Sapient and Epsilon Growth Intact for Publicis; Maintaining FVE; Shares Attractive

Publicis continued the strong showings by its ad holding peers, with first-half results beating the FactSet consensus estimates. While the numbers displayed strength in demand for all its services, we were most pleased about the continuing turnaround in Sapient, which until the pandemic was viewed as a failed acquisition. As Publicis further diversified its offerings and added data management and analytics with the acquisition of Epsilon, it also enhanced and widened Sapient’s consulting services. In our view, the current economic uncertainty has pushed many businesses to further prioritize digital transformation to operate leaner during a downturn, which many of them experienced during the pandemic. On the advertising and creativity side, we think demand is intact as many advertisers remain hesitant to cut spending, fearing it could come at the cost of losing revenue during the initial phase of a potential earlier economic recovery. Management increased its guidance for the full year. We did not make significant changes to our Publicis projections and are maintaining our EUR 69 fair value estimate. We continue to view the stock, which has a 5% dividend yield, as attractive.