Investec downgrades WPP to 'hold'

Investec downgraded WPP to ‘hold’ from ‘add’ and cut the price target to 1,380p from 1,480p, pointing to increased risk to global GDP expectations, “whether perceived or real is yet to be decided."

The brokerage said shares have held up well given WPP’s position as a global market barometer, helped by strong fourth quarter trading and good new business wins.

“We do not think this changes near term, but history suggests global agencies can de-rate quite aggressively in tougher times,” it said, adding the stock appears to be valued at a relative premium to global peers.

Investec argued that global advertising is historically well correlated to global GDP, with corporate profit and consumer spending important drivers within this.

It forecasts GDP at around +3% in the current year, but sees more downside risk than upside currently and said emerging market advertising could be hit further.

It noted that three major global agencies are due to report this week, which will give a good feel for fourth quarter trading.

Omnicom, Publicis and Interpublic are all due to issue results.

At 1143 GMT, WPP shares were down 3.5% to 1,368p.