Barclays hikes target for WPP, says company guidance too conservative

Analysts at Barclays reiterated their 'overweight' recommendation for shares of WPP, arguing that the company's guidance for sales growth and operating margins was too "conservative".

Hence, they concluded: "While WPP shares have rallied from their lows, we would argue they remain good value at 9x 2021 [estimated price-to-earnings]. We reiterate our Overweight rating with an increased 800p target (lower forecasts offset by higher market multiples)."

The target price was lifted form 760p previously.

They also sounded a positive note ahead of the advertising giant's Capital Markets Day towards the end of the year.

As regards the company's "first attempt" at full-year guidance for 2020 on sales and margins at the earnings before interest, taxes, depreciation and amortisation level, they conceded that "Management is rightly pointing out that we still don't know the true economic impact of Covid-19 and we still don't know whether we will see a second wave in the winter."

Nevertheless, markets were not yet pricing in a second wave, so in their opinion WPP management, led by Chief Executive Mark Read, was being "unduly conservative".

On the CMD, they were "hopeful" that it could be a positive catalyst, although they asked for more colour on the breakdown of its sales, the level of sustainable margins, and on WPP's plans for M&A, dividends and share buybacks.