WPP under pressure after Exane cuts ad agencies ratings
LONG-STANDING bull Exane BNP Paribas has turned negative on advertising giant WPP, sending shares to a one-year low in intraday trade.
A double downgrade from “outperform” to “underperform” prompted investors to dump the FTSE 100 stock yesterday. The bank held an “outperform” rating on WPP from January 2012, data from Bloomberg showed. Exane also lowered its price target sharply from £21.50 to £15.40.
Analyst Charles Bedouelle said industry challenges facing WPP and its peer Publicis could be “bigger and more protracted than many believe”. He said the industry needed to evolve much faster than previously thought to compete with rivals. Mr Bedouelle added: “Marketing is driven by mobile, nimbler brands, ecommerce and automation. These areas are dominated by platforms where agencies are sparse, raising the risk of lower mid-term growth.”
WPP, which was hit by a cyber attack last week, fell to £15.47 in intraday trading, marking its lowest level since June 30 last year. It ended the day down 41p, or 2.5pc, at £15.69.
After stuttering at the opening bell, the FTSE 100 turned positive in afternoon trade on the back of a forecast-beating US jobs report. Non-farm payrolls jumped by 222,000 jobs last month, data from the Labor Department showed, well ahead of predictions of a 179,000 gain. The FTSE 100 finished up 13.64 points, or 0.19pc, at 7,350.92.
Low-cost carrier easyjet flew 72p higher at £14.19 on a rating upgrade. Credit Suisse raised its rating from “neutral” to “outperform” citing improving summer trading trends. Analyst Neil Glynn said profitability could return to levels last seen in 2013-14 as market confidence recovers.
Energy provider Centrica was also among the top gainers, up 5.8p to 207.7p, on an unsubstantiated takeover report. Analysts urged investors to tread with caution after a media report suggested a consortium of foreign investors could be interested in the group. Jefferies said the deal was unlikely as funds in those countries were “typically interested in regulated infrastructure assets”, while Centrica’s core business was its UK retail business. Elsewhere, utility firm Severn Trent inched up 42p to £22.08 after HSBC raised its rating to “hold” from “reduce”. Meanwhile, UBS cut Royal Mail’s rating to “sell” from “neutral”, sending shares 14.2p lower to 410.3p. Analyst Dominic Edridge believes the postal service will continue to see sub-market parcel growth due to its need to modernise.
Broadcaster ITV fell 5.3p to 176.6p following a price target downgrade by JP Morgan, while Peppa Pig maker Entertainment One bounced 9p to 230.1p after Citigroup began covering the mid-cap stock with a “buy” rating. Computacenter also gained ground, up 41.5p to 879.5p, as Barclays upped its rating to “overweight” citing strong secondquarter trading.
Berenberg began covering Coats Group with a “buy” rating, lifting shares 1.5p to 76.1p. Analysts said the thread specialist, which entered the FTSE 250 last month, is well positioned to win market share.
Finally, retailer Dunelm rallied 23p to 620p, underpinned by strong fourth-quarter sales, while engineer Fenner enjoyed its best day in six months, up 26.3p to 317.5p, on a positive outlook.