WPP: Restructuring And AI Initiatives Will Drive Long-Term Share Re-Rating

Analysts have trimmed their price targets on WPP by roughly $3 per share, or about 10 to 15 percent, as they factor in a more cautious outlook tied to prolonged restructuring, balance sheet concerns, and slightly lower medium term growth expectations.

Analyst Commentary

Recent Street research on WPP highlights a mixed backdrop, with analysts balancing incremental optimism on valuation against ongoing concerns around execution risk and balance sheet strength.

Bullish Takeaways

• Bullish analysts see upside potential from current depressed multiples, arguing that even modest progress on restructuring could support multiple re-rating over the medium term.
• The decision by some firms to retain Buy ratings despite reduced price targets suggests confidence that WPP can ultimately stabilize organic growth and protect earnings power beyond the next restructuring cycle.
• Reports of industry interest in WPP assets, including potential strategic combinations, reinforce the view that the company’s portfolio still holds strategic value that is not fully reflected in the share price.
• Incremental EPS cuts of only low single digits for 2026 and 2027 indicate that long term profit expectations have not been radically reset, implying scope for upside if management executes more smoothly than feared.

Bearish Takeaways

• Bearish analysts emphasize a deep, prolonged turnaround with repeated restructuring cycles, seeing this as a drag on near term execution, client momentum, and visibility on sustainable growth.
• Concerns around the need for a materially stronger balance sheet weigh on confidence in WPP’s ability to invest for growth while also navigating macro and industry headwinds.
• Some view private equity involvement or a large scale break up as less plausible, which limits the likelihood of a rapid, event driven rerating and keeps focus on slower, operational improvement instead.
• Lowered price targets in both the UK and US listings, including from JPMorgan, underscore a more cautious view on valuation as slightly weaker organic sales growth expectations are reflected in models.

What's in the News

• Havas N.V. has reportedly expressed interest in WPP, with potential scenarios ranging from a full takeover to acquiring select assets, though no formal bid has emerged yet (Bloomberg, citing The Times).
• Following media speculation about a possible deal involving WPP, Havas CEO Yannick Bollore told employees the group is not in discussions with WPP about an investment, while leaving the door open to larger acquisitions aligned with its strategy in the future (Bloomberg).
• WPP cut its 2025 guidance, now expecting like for like revenue less pass through costs to decline 5.5% to 6.0% and headline operating margin to be about 13%, signaling a tougher trading environment than previously anticipated.
• The company launched WPP Open Pro, a new AI powered marketing platform that lets brands of all sizes plan, create, and publish campaigns independently, aiming to broaden WPP’s addressable market and deepen adoption of its AI tools.
• WPP and Google agreed a five year, $400 million expansion of their partnership focused on cloud and AI, giving WPP early access to Google’s latest AI models and embedding Google technology more deeply into WPP Open and client solutions.

Valuation Changes

• Discount Rate has risen slightly from 9.96% to about 10.18%, signaling a modest increase in the perceived risk profile or required return.
• Revenue Growth assumptions are essentially unchanged at around minus 15.23%, indicating no material shift in top line expectations.
• Net Profit Margin has improved slightly from roughly 5.44% to about 5.45%, reflecting a marginally more optimistic view on profitability.
• Future P/E has edged up modestly from about 11.28x to roughly 11.33x, implying a small increase in the valuation multiple applied to forward earnings.