Company Reports

Narrow-moat WPP Group reported less-than-stellar results for its first quarter. We are lowering our fair value estimate to GBX 940 per share from GBX 1,010 as we account for a higher probability that the company comes in at the very low end of its growth targets and struggles to meet its medium-term goal of 3%-5% growth. Our revised fair value estimate is still roughly 15% above the current price as of this writing. We do not think the valuation is demanding, but we believe WPP will have to prove that it can at least keep up with peers on revenue growth before its valuation gap with peers begins to close.

WPP is the largest player in the advertising space, operating in more than 110 countries. We expect the firm to maintain its market-leading position as it generates competitive organic growth, continues to make acquisitions, and increases focus on the faster-growing emerging and overall digital ad markets.

WPP is the largest player in the advertising space, operating in more than 110 countries. We expect the firm to maintain its market-leading position as it generates competitive organic growth, continues to make acquisitions, and increases focus on the faster-growing emerging and overall digital ad markets.

WPP posted fourth-quarter results mostly in line with expectations. However, its 2024 organic growth guidance remained well below the outlook provided by its peers as account losses will pressure the firm mainly in the first half. Investment in this name still requires patience, as WPP has been late in integrating the technology and data behind its media and creativity. However, we do not think WPP is too far behind its peers. We still believe that with the largest media agency, GroupM, and the most advertising revenue in the world, WPP can turn around its creativity business and strengthen its organic net revenue growth in the second half of 2024. We are maintaining our GBX 1,250 fair value estimate of WPP.

WPP is the largest player in the advertising space, operating in more than 110 countries. We expect the firm to maintain its market-leading position as it generates competitive organic growth, continues to make acquisitions, and increases focus on the faster-growing emerging and overall digital ad markets.

WPP’s message at its analyst day was similar to what peer Publicis mentioned last week: Investments in artificial intelligence will enhance the media and creative sides of the business while increasing efficiency. We were pleased with the strategy outlined and view it as a necessary one, given the market perception that WPP has been hesitant and a bit late on that front. While we applaud the firm’s investments in data, technology, and AI on the media side over the last three years, we think the creative side has remained in a silo. However, it appears that the firm is addressing that, as its media and creative businesses will now both work on top of one data, technology, and AI layer—WPP Open—increasing productivity and efficiency.

WPP reported another disappointing quarter, unlike two of its largest competitors, Publicis and Omnicom. Like IPG, WPP’s higher exposure to technology clients, the largest of which have cut their advertising and marketing spending, drove organic net revenue down. We expect most firms in that sector to increase their spending in 2024.

WPP is the largest player in the advertising space, operating in more than 110 countries. We expect the firm to maintain its market-leading position as it generates competitive organic growth, continues to make acquisitions, and increases focus on the faster-growing emerging and overall digital ad markets.

While WPP posted organic growth in the first half, the results were disappointing due to the decline in ad spending by technology clients in the U.S. in the second quarter, the impact of the loss of the Walgreens account, and like its peers, the slowdown in spending on digital transformation. Lower spending in the technology, media, and telecom sector affected WPP more than its peers, given the firm’s higher exposure. For these reasons, the firm reduced its full-year organic growth guidance to 1.5%-3% from 3%-5%.

WPP’s first-quarter net revenue update supports our assumption of 4% full-year net revenue organic growth as the firm experienced growth across all its segments and in all regions in which it operates. We think that with improvements in China and India during the second half of this year, and less economic uncertainty in Europe and the U.S., organic growth likely will be at the high end of WPP’s 3%-5% 2023 guidance, which was unchanged.

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.

WPP is the largest player in the advertising space, operating in more than 110 countries. We expect the firm to maintain its market-leading position as it generates competitive organic growth, continues to make acquisitions, and increases focus on the faster-growing emerging and overall digital ad markets.

WPP is the largest player in the advertising space, operating in more than 110 countries. We expect the firm to maintain its market-leading position as it generates competitive organic growth, continues to make acquisitions, and increases focus on the faster-growing emerging and overall digital ad markets.

WPP reported better-than-expected third-quarter net revenue, like its peers. While its clients face macro uncertainties, they continue to spend on advertising, data analytics, technology, and overall digital transition as their dependency on first-party data increases. WPP updated its full-year guidance and expects organic growth to be at the upper half of its previous guidance, while margins could expand a bit less than previously thought. We did not make any significant changes to our projections and continue to expect deceleration in growth in 2023 given the ongoing macro uncertainty in the U.S. and Europe, partially offset by the firm’s account wins this year. We are maintaining our GBX 1,340 fair value estimate, which represents an attractive 75% upside to where the shares are trading now.

WPP is the largest player within the advertising space, operating in more than 110 countries. We expect the firm to maintain its market-leading position as it generates competitive organic growth, continues to make acquisitions, and increases focus on the faster-growing emerging and the overall digital ad markets.

While WPP’s first-half results beat the FactSet consensus estimates on the top and bottom lines, and management raised its net revenue growth guidance for the year, the stock declined more than 8% due to expected margin contraction. With the latest U.S. employment numbers casting some doubt over severe economic weakness, we believe demand for WPP’s advertising services will remain strong during the second half of this year. We did not make material changes to our model and are maintaining our GBX 1,340 fair value estimate for WPP. In our view, this narrow-moat name remains attractive.

WPP reported first-quarter revenue well above expectations, with growth across all businesses and regions. We continue to believe that the resurgence in brand advertising will help drive organic growth for WPP and its peers, while WPP’s investments in data and technology will continue to attract and expand relationships with clients like Mars, JDE Peet’s, and Sky in the first quarter along with Coca-Cola at the end of 2021. We did not make any changes to our model and are maintaining our GBX 1,340/$90 fair value estimate. We continue to view WPP as one of the most attractive stocks among the ad holding firms, as the shares remain in 4-star territory.

WPP reported mixed fourth-quarter results with net revenue slightly missing FactSet consensus estimates while margin expansion helped the bottom line exceed expectations. Double-digit organic growth during the quarter was driven by the economic turnaround, account wins and retention, and the firm’s investments in data and technology, while efficiency improved in all business segments and regions. We continue to believe the resurgence in brand advertising will help drive organic growth for WPP and its peers, while WPP’s investments in digital, data, and creativity will attract large clients as it did with the Coca-Cola win in late 2021. We did not make significant changes to our model and are maintaining our GBX 1,340 fair value estimate for WPP. We continue to view this narrow-moat stock as one of the most attractive among ad holding firms. With the recent decline in the stock price, WPP is again trading in 4-star territory.

WPP is the largest player within the advertising space, operating in more than 110 countries. We expect the firm to maintain its market-leading position as it generates competitive organic growth, continues to make acquisitions, and increases focus on the faster-growing emerging and the overall digital ad markets.

We no longer view WPP as one of the more attractive names in the advertising space as the stock is now in 3-star territory and is approaching our fair value estimate of GBX 1,340. We now see better investment opportunities in names like Alphabet and Meta Platforms, trading at only 0.78 and 0.77 times our fair value estimates, respectively.