Credit Suisse cuts WPP target price following string of account losses

Analysts at Credit Suisse lowered their target price on British advertising firm WPP on Tuesday as a result of lower than expected organic growth due to a recent speight of major account losses.

Credit Suisse dropped their target price on WPP to 1,200p from its previous 1,320p estimate after the FTSE 100-listed outfit suffered a string of account losses including Kimberly Clark, Ford, GSK, Amex, United Airlines and much of its Pepsi business.

The broker cut its 2018 growth estimates on WPP by 10bps to 50bps and its 2019 growth estimates by 80bps to 0.6%. CS also lowered its estimated full-year organic growth to 0.5% from 0.6%.

Taking into account previous restructurings from Publicis and WPP, Credit Suisse said that, moving forward, it expects to see more creative mergers, more offshoring, more property consolidation, a trimming of market research and a reinvestment in talent.

Credit Suisse said: "With potential restructuring at 3-5% of sales this would lower FCF (pre-savings) by 9-14%. Current valuation likely already reflects potential restructuring: the greater uncertainty lies in growth levels."

The Swiss broker kept its 'neutral' rating on the stock unchanged.