Solid Growth and Margin Expansion Likely to Continue in 2023 at WPP; Stock Undervalued

WPP closed another strong year, and while the stock has increased 28% year to date, we think it remains the most attractive of the large advertising holding firms, trading at only 0.78 times our GBX 1,340 fair value estimate with a 3.8% dividend yield. While ad spending may slow due to a possible economic downturn in the first half of this year, we think the firm can hit its 2023 organic growth and adjusted margin expansion forecast. Recent account wins, differentiation on the creativity front, investments in technology and data analytics, and a restructuring that has streamlined operations position WPP well to accelerate revenue growth and create operating leverage.