UBS gave a lift to advertising giant WPP group PLC (LON:WPP) today, initiating coverage on the stock with a ‘buy’ rating and 2,050p target price, in a note also starting its French peer Publicis SA with ‘buy’.
In reaction, in early morning trade in London, the FTSE 100-listed firm's shares were 1.4%, or 23p higher at 1,692p.
READ: WPP bearish amid loss of some major accounts and global uncertainty
In a European advertising sector note to clients, the Swiss bank’s analysts said: “We expect organic growth in the sector to inflect in H217, allaying structural concerns; while lead indicators (e.g. macro, top 100 advertiser revenue forecasts) are looking positive.
They added: “We believe valuations for WPP and Publicis (12-13x FY18E PE) look compelling versus the broader European market, despite 12% historical EPS growth likely slowing to 7%.”
In their specific note on WPP, the analysts said: “Despite seeing structural threats dampen organic growth, WPP looks well placed to deliver EPS growth, albeit at a slower rate. In FY17-21, we forecast EPS to grow at a 7% CAGR vs 11% in FY11-16 and WPP's long-term guidance of 10-15%.”
They added: “A net sales recovery in H217 should provide a re-rating catalyst.”