Deutsche Bank has cut its target price for FTSE 100 media firm WPP PLC (LON:WPP) to 1,010p from 1,160p as it questioned the recent lows of shares in advertising agencies.
Analysts at the German investment bank said that rather than being directly threatened by digital disruption caused by advertising across social media platforms and FANG stocks (Facebook, Apple, Netflix, Google), the “real problem” for advertising agencies was their over-exposure to activities that they classed as having “declining strategic importance”, with a client base that was heavily focused on cost cutting rather than investing.
READ: WPP posts sharp drop in third quarter trading, cuts guidance as new boss unveils more disposal plans
The price cut follows a disappointing set of third quarter results for WPP in October, when it reported that underlying net sales less pass-through costs had fallen by 1.5% compared with a 0.7% rise in the previous three months.
The group also reduced its full-year 2018 guidance to reflect the slowdown in the third quarter and a more cautious outlook for the rest of the year, with like-for-like revenue less pass-through costs now likely to be down 0.5%-1.0%.
It was all bad news for the new chief executive, Mark Read, who took over after founder and former CEO Martin Sorrell was forced out in April amid a probe into alleged misconduct.
In late-morning trading Tuesday, WPP shares were down 1.6% at 842.2p.