WPP hit by share downgrade

25 March 2009

LONDON: Citigroup Global Markets, the brokerage and securities firm, has downgraded WPP Group, the marketing services conglomerate, from "buy" to "hold", despite the fact it is the "best positioned" of the major advertising holding groups.

WPP's net profits fall 5.8% to £439.1 million ($626m; €493m) in 2008, but its revenues rose by 20.9% to £7.48bn, and the company is attempting to diversify its operations both geographically and from traditional advertising and media duties into insight generation.

However, while Citigroup argued that shares in WPP were not "especially expensive," it suggested the adland giant's market value is "not sufficiently compelling to support a 'Buy' rating."

Agency holding groups were also said to be of the greatest interest to investors during the period from October until they release their full-year results in the first quarter of the following year.

This was said to be for a "good reason" by Citigroup, which posited that revenues and profits for companies like WPP are often "concentrated in Q4, and especially November/December."

It also stated that there is an “inherent asymmetry in how underdelivery/overdelivery versus budgets is received during the year," making the final quarter a strong area of focus.

Data sourced from AdWeek; additional content by WARC staff