Analyst Actions: WPP Downgraded by Pivotal to Hold From Buy, Price Target Kept at GBP14.20

WPP ( WPP ) received an investment-rating downgrade Monday to hold from buy from Pivotal Research Group just days after the firm had raised the rating to buy.

Pivotal noted to clients that its Thursday upgrade of the stock to a buy investment rating had followed the advertising, marketing and communications company's report of weaker-than-expected Q4 adjusted earnings per share and revenue that the firm had said prompted the stock to overreact to the downside. The firm lowered its price target at the time to GBP14.20 from GBP15.80 while making the upgrade.

Monday, Pivotal said the quick reversal of its Thursday upgrade came as the stock had already recovered some of the losses that had led to the downgrade, although the firm maintained the price target it set Thursday at GBP14.20.

The London-traded shares had closed at GBP13.94 Wednesday prior to the release of the Q4 report and sank to GBP11.87 in Thursday intraday trading before closing Thursday's session at GBP12.80. As of recent Monday trading, the shares were at GBP12.63.

Pivotal also noted Monday that with the Q4 results now in for agency-holding companies, global organic revenue growth for the sector amounted to 0.9% for the quarter and 1.0% for the year. The 1.0% growth rate for 2017 is down from 3.0% growth in 2016 and 4.0% growth in 2015.

While the firm said the exclusion and non-disclosure of pass-through revenue from some holding companies distorts the analysis, "the trends causing deceleration are real, and the degree to which they persist will impact longer-term growth expectations."

Pivotal added: "Some of these trends will abate over time, while others will prove to be permanent features of the industry. However, we think that businesses we call 'agencies' can be remarkably entrepreneurial, and retain confidence that new activities will eventually support incremental growth opportunities. Combined, normal low-single-digit growth should eventually return for the industry, although it will likely remain relatively tepid during 2018."

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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