Goldman Sachs says WPP’s Read is on the right track

The mighty Goldman Sachs has directed some welcome intelligence (if that’s what it is) WPP’s way, saying the marcoms group stands to benefit as “some large advertisers” step up their marketing efforts.

It says its shares, currently 960p, should benefit from a re-rating on “improving organic growth momentum and cost cutting our view recent new business performance is particularly encouraging given the departure of long-standing CEO Sir Martin Sorrell in April 2018 and the company’s ongoing reorganisation – which we previously highlighted as a risk.”

The investment bank expects WPP’s organic growth to “improve” to -0.7 per cent in the second half of the year, from -2.8 per cent in the first half. Furthermore its “new business tracker” (didn’t know it had one of those) shows that WPP shouldn’t lose out too badly in the current LG and Novartis reviews. It reckons the shares will hit 1150p later this, a near 20 per cent increase on current levels.

In other words a welcome vote of confidence (from WPP’s point of view) in CEO Mark Read (above) and a vindication of his cautious approach to market expectations.

Read has been, mostly quietly, cutting costs here there and everywhere. Lots of people have gone (but that’s adland for you) and reducing the number of WPP entities (it has thousands of companies) will save a packet.

If Read can, somehow or other, move WPP’s organic growth into positive territory he’ll emerge as the unlikely hero of the hour.

PS Goldman also reckons ITV and Cannes Lions owner Ascential may be takeover targets as the media business consolidates. It would be fun if Ascential receives a bid, timed for the Cannes Lions which begin on June 17.

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