Analysts at Berenberg raised their target price on media outfit WPP from 980.0p to 1,030.0p on Friday after third-quarter growth came in higher than consensus.
Berenberg stated that while “strong results” posted by rivals Publicis and IPG had led to “a whisper number” for WPP’s growth that was higher than the 9.8% anticipated by analysts, the 15.7% that the firm ultimately published was “clearly better than expected”.
Although Berenberg, which reiterated its ‘hold’ rating on the stock, acknowledged that figure included a one-off that it estimates added around 130 basis points to the result, the analysts said even excluding this boost it was a strong result.
“On a two-year stack (versus Q3 2019) growth was 6.9%, which compares to a two-year increase of 5.0% for Publicis, 10.8% for IPG and -1.5% for Omnicom,” noted Berenberg.
The German bank added that the valuation gap was still wide, pointing out that for those investors that can “get comfortable” with the medium- to long-term sustainability of growth for the agencies, both WPP and Publicis were “cheap”.
“However, we think it will take several more quarters of decent growth to persuade the doubters. In the meantime, Publicis, which has given back the gains it initially made with its own strong results, remains far cheaper than WPP, which is why we maintain our preference for the French group,” concluded Beremberg.
