(Sharecast News) - Credit Suisse upgraded WPP and Publicis on Wednesday to 'outperform' from 'neutral' as it said its analysis of the advertising agency industry suggests the structural headwinds which caused the de-rating of the agency stocks have significantly abated.
The bank lifted its price target on WPP to 1,260p and on Publicis to €87.
CS said the drag on organic growth from fast-moving consumer goods (FMCG) companies has all but disappeared and these companies are now investing more in marketing, as shown by Unilever's increase in brand spend in its results for FY22.
The bank said in-housing continues but the model has shifted to working with agencies for the higher value creative, technology and consultancy services.
It also said the concern over consultancies expanding into media and creative has proved exaggerated and pointed out that Facebook and Google have not disintermediated agencies in media as the digital market has grown in complexity.
"While WPP and Publicis have recovered from trough multiples, if investors are convinced their long-term growth prospects have improved, we see potential for P/E multiples to expand to 13-14x versus 10.3-11.5x currently," Credit Suisse said.
WPP (WPP)
