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Shares in FTSE 100 media big WPP (LSE: WPP) soared to over 1,900p in 2017, however have since slumped to round 500p.
We noticed a short restoration after the 2020 inventory market crash. However WPP is the worst Footsie performer to this point in 2025, dropping a 3rd of its worth 12 months to this point. Hmm, perhaps I ought to mud off my contrarian purchase button.
What’s fallacious now?
On 9 June the corporate introduced the pending departure of CEO Mark Learn, who took over from Sir Martin Sorrell in 2018. It appears he “determined that the time is true for him handy over to a brand new chief and the seek for a successor is underway“.
Does this sounds a bit sudden, and perhaps not nicely ready? I ponder if he’d have made the identical determination had the corporate not simply misplaced a $1.7bn Mars media deal? And if it hadn’t additionally misplaced huge contracts with Pfizer and Coca-Cola? Some sources are suggesting his days have been numbered.
However doesn’t it imply we needs to be contemplating promoting WPP shares? And that I is likely to be mad to consider shopping for?
Unhealthy occasions make unhealthy decisons
We’re at present nonetheless affected by inflation and excessive rates of interest. And we simply heard that the UK financial system shrank 0.3% in April. The US is in some turmoil too, with inflation fears rising on the again of President Trump’s aggressive method to worldwide commerce.
That is certainly a time when corporations have greater priorities than advertising and marketing, promoting, and media spend. And that in flip should make short-term information a poor indicator of whether or not we should always take into account shopping for shares in a sector like this.
And isn’t that when contrarian buyers who see long-term attraction ought to take into consideration leaping in and shopping for, whereas a inventory is down?
What are the sights?
There’s a forecast dividend yield of seven% at WPP, boosted by the fallen share value. Locking in that form of return might be properly worthwhile. Nevertheless it is dependent upon whether or not the dividend is more likely to be sustained.
Forecasts at present recommend it is going to be, no less than till 2027. And that it needs to be solidly coated by earnings. Analysts additionally suppose earnings will develop within the subsequent three years. However I ponder in the event that they is likely to be a bit outdated now and will reduce after they get their heads spherical the newest outlook? That’s a hazard.
Most brokers have WPP as a Maintain, regardless of setting a value goal vary of 520p to 740p — with the shares at 550p on the time of writing. It suggests their ideas are dominated by uncertainty proper now and so they don’t wish to commit.
What to do?
WPP wants to reply to a altering enterprise. And it’s one by which synthetic intelligence (AI) is more likely to play an growing half. May that open competitors to leaner and smarter AI-based operations? It’s doable WPP might go the way in which of dinosaurs.
However expertise constructed up over many years ought to nonetheless depend for lots. And for individuals who see a worthwhile long-term future for this sort of enterprise, WPP certainly must be one to think about for a possible (dangerous) restoration purchase.
