WPP PLC (LON:WPP) has been upgraded to ‘buy’ from ‘hold’ by analysts at Deutsche Bank (DB) after they said expectations for the group were now so low that even delivering on its current guidance would be enough to lift the shares.
In a note, the German bank added that if there was “any indication” that operations were less bad than what the market was currently predicting, then the positive reaction could be “more substantial”.
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The comments followed a ‘less bad than expected’ outlook for 2019 at the start of March when the FTSE 100 media agency said like-for-like revenue less pass-through costs would fall by 1.5% to 2% in the year.
The company is currently in the midst of a turnaround programme spearheaded by new chief executive Mark Read, who took over the reins after founder and former boss Martin Sorrell left last April following allegations of personal misconduct.
Like the rest of the traditional advertising sector, WPP has come under pressure from online competition and weaker business confidence amid Brexit uncertainty, a US-China trade dispute and concerns about a global economic slowdown.
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DB stressed that they weren’t forecasting a return to meaningful growth “any time soon”, however, they would be upgrading the stock due to “structural concerns over the industry lifting, management having set low expectations and a supportive valuation”.
The bank also retained its share price for the firm at 1,010p, saying the shares were currently trading at a “multi-year discount”.
“With a 7% dividend yield, covered by both earnings and cash, we think downside risk is limited.”
In mid-morning trading Monday, WPP shares were up 3.7% at 840.9p.