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WPP headwinds not seen relenting, Credit Suisse downgrades
WPP is facing flat revenue growth and margins in 2018, with a number of headwinds besides that led Credit Suisse to downgrade its rating on the stock to 'neutral' from 'outperform'.
Credit Suisse, which lowered its target price to 1,440p from 1,500p, said it had been wrong to give more weight to WPP's depressed valuation over its poor revenue momentum, even though it had remained cautious on the ad agency subsector.
Organic growth is seen as likely to remain under pressure with no relief seen in structural headwinds for ad agencies, with the Swiss bank predicting WPP will guide to flat revenue and margin in for 2018 while the average of analyst forecasts is for 1.3% sales and a 10 basis-point improvement in margins.
"We have not yet picked up evidence of broad-based FMCG recovery and see the disconnect between GDP, advertising and agency fees continuing," analysts wrote, also noting that the auto sector offers another contract risk this year, with Ford calling for a "marketing reset".