Credit Suisse upgraded WPP to ‘neutral’ from ‘underperform’ on Friday and lifted the price target to 1,060p from 835p as it argued that a record advertising recovery is overriding structural concerns.
“With both GroupM and MAGNA significantly increasing 2021 forecasts (to mid-teens) and predicting a record advertising recovery, structural concerns about agency holding companies have taken a back seat,” the bank said.
“This could continue for some time as government stimulus and recovery in some pandemic-impacted sectors such as travel, telecom, media & entertainment and retail kick in.”
Credit Suisse attributed the increase in the target price to earnings upgrades, the roll-over of net debt, and a rise in terminal growth to 1% from 0%.
The bank said the best way to gain exposure to the subsector is through Martin Sorrell’s outperform-rated S4 Capital, “given its multiple levers for market share gain”. CS said M&A alone could add around 45% to S4’s EBITDA and 30% to valuation, on its numbers.
At 1545 BST, WPP shares were up 2% at 999.60p.
