Is WPP a buy? Not according to one leading bank

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WPP PLC (LON:WPP) “demonstrated” resilience as it followed rival Publicis in revealing better than expected second-quarter results.

This is according to the German boutique bank Berenberg, which has raised its earnings estimates and price target for the  advertising and marketing giant.

The latter moves to 635p a share from 565p, though Berenberg’s recommendation remains unchanged at ‘hold’.

“While clearly cheap, WPP trades, on both levered and unlevered metrics, at a premium to Publicis, and we see more upside in the French group,” it said in a note to clients.

Last week FTSE100 WPP said it had decided to pay an interim dividend in spite of racking up a £2.6bn loss in the first half of 2020.

Chief executive Mark Read said WPP was on a stronger financial footing than it had been.

It has £4.7bn of ‘liquidity’ thanks mainly to the sale of a majority stake in the consulting group Kantar, and a falling cost base.

Revenue in the first half was £5.6bn, down from £6.4bn a year earlier. On a net basis revenue was £4.7bn (£5.2bn) while underlying profits fell 44% to £276mln.

Impairments of £2.7bn relating to earlier acquisitions and Y&R Rubicon, in particular, meant a loss of £2.6bn.

“Assuming there is no second wave nor major lockdowns, the second quarter is expected to be the toughest period of the year, although we remain cautious on the speed of recovery,” said Read.

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