Liberum Capital has chopped its target price for WPP PLC (LON:WPP) shares back to 1,375p from 1.750p after reducing estimates in the wake of the advertising giant’s disappointing third-quarter numbers.
In a note to clients, the City broker’s analysts noted that WPP’s post-update conference call highlighted that the company’s recovery is not likely to come soon with 2019 set to be a difficult year and it also flagged up the need for significant investments.
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They noted: “The contrast with comments from other Agency groups suggest that much of WPP’s issues are company specific than industry-wide and that provides optimism, as WPP (eventually) is likely to turn things around.”
But in the meantime, the analysts added, they have cut their full-year 2019 estimates for WPP by 15% on a reported basis, and by even more when adjusted for currency headwinds.
However, they concluded, with WPP shares now trading at less than 8 times next year’s earnings forecast, the stock is effectively pricing in a secular decline when it looks like the company’s issues are more specific in nature and, crucially, can be turned around.
Liberum maintained a ‘buy’ rating on WPP which, in late morning trading, was still the FTSE 100 index’s biggest casualty, down 18.2% at 864p.