WPP PLC (LSE:WPP) shares fell 4.5% to 265.6p after Goldman Sachs initiated coverage of the advertising group with a 'sell' rating, arguing that a return to meaningful growth could prove difficult without a reshaping of its portfolio.
The US investment bank set a 240p price target on the shares, versus a last closing price just over 278p.
Goldman was sceptical that WPP could restore organic growth in the near term, pointing to ongoing structural challenges and a "weak" free cash flow outlook.
While asset sales could provide an upside catalyst, the bank noted that any disposals "would also remove associated earnings contribution, with the net EPS impact likely to depend on the valuation realised".
The broker expects much of the group's planned £500 million cost-saving programme to be offset by higher staff incentives, investment spending and wage inflation.
Free cash flow is forecast at £684 million by 2028, below current market expectations and well short of the £1 billion-plus generated in both 2022 and 2023.
The bearish stance contrasted sharply with Goldman's view on WPP's international rivals, with coverage of both Publicis and Omnicom started with 'buy' ratings, arguing that investors are underestimating earnings growth potential at the French advertising group and the benefits of Omnicom's merger with Interpublic.
Goldman said Omnicom's enlarged scale, data capabilities and AI-led services should support mid-single-digit organic growth and margin expansion over the coming years, while Publicis retains scope to boost earnings through acquisitions and further efficiency gains.
