WPP PLC's (LSE:WPP) new CEO, Cindy Rose, has endured the week from hell. Thursday’s profit warning sent shares down 16% yesterday, giving a running total of 64% for the year.
The advertising giant’s third-quarter results revealed deeper weakness in client spending and forced another downgrade to its guidance for next year.
UBS cut its price target to 280p from 360p and kept its 'sell' rating, warning that organic growth would remain negative for at least the next four quarters. “WPP’s results exhibited some weakness,” said analyst Adam Berlin.
He pointed to a 40-basis-point miss on quarterly revenue growth, which fell 5.9% against expectations of a 5.5% drop, and to a downgrade in both sales and profit margin targets for 2025.
UBS expects WPP’s recovery to be slow, with “organic growth likely to be negative for at least the next four quarters” and cash generation “very weak” next year. T
he broker also flagged risks that the company could lose its place in major stock indices such as MSCI Europe or the FTSE 100. It cut earnings forecasts by up to 14% and now assumes flat margins of about 13% over the next two years.
Deutsche Bank took a more forgiving line. Its analyst Steve Liechti called the updated guidance “sensible caution” ahead of a full strategy review under the new chief executive early next year.
The bank trimmed its target price to 510p from 550p but kept a 'buy' rating, arguing that the sell-off looks overdone.
“While bruised by this latest downgrade, we maintain our Buy rating given value and broader market sentiment capitulation,” Liechti wrote.
UBS remains unconvinced that WPP can deliver much improvement before 2026, citing weak client budgets and falling new business.
Deutsche, meanwhile, sees scope for sentiment to stabilise once the strategic review gives investors a clearer view of the company’s priorities.
For now, investors seem to be siding with the bears. At 297p, WPP’s shares are back to levels last seen during the pandemic, and the advertising group will need more than words to win back the market’s confidence.