WPP PLC and ITV PLC offer value as Citibank sees V-shaped recovery for advertising


There is scope for a “mildly less severe downturn” than the market fears in the short term, the Citi analysts reckon, with a pick-up in revenue into the back half of the year

Global advertising trends point to a V-shaped recovery for the industry once the major disruption from coronavirus passes, says Citigroup.

Citi analysts said they were upbeat on () and the other major agencies given the lower volatility to their earnings and current cheap valuations, and “see value” for broadcasters and producers such as () and Walt Disney Co ().

Tracking commentary from the top 100 global advertisers, media sector analysts at the US bank came to various conclusions, the primary one being that the disruption from COVID-19 was heavy in the short-term but a “V-shaped recovery is in sight”.

The analysts said their positive fundamental view on WPP and ‘buy’ rating was reinforced by positive catalysts expected over the coming three months.

These include scope for a “mildly less severe downturn” than the market fears in the short term, a pick-up in revenue into the back half of the year, scope for good news on potential cost savings in the medium term, and a possible boost to earnings from restarting the share buyback.

All this comes against a “very depressed valuation” both in absolute terms and relative, with WPP shares trading at around 8.0 times 2021 forecast earnings versus US peers on forward p/e ratios of at least 10 times. 

Football restart potentially bad for ITV

Some contrast was provided by ’s economists, who told clients that the global economy is showing “no sign of any ‘V’ shaped recovery in any of our metrics” and that “some rebounds are already showing signs of flattening out at subdued levels”, with many people remaining reluctant to return to work, use public transport or send children back to school, “which will continue to hinder a forceful recovery”.

Despite the encouragement seen elsewhere for advertising trends, the confirmation over the weekend from the English Premier League that top-flight games will resume from June 17 is negative for ITV, analysts at Deutsche Bank said.

READ: BT and Sky set for summer sports binge as Premier League restarts

This is because the Premier League said all its 92 remaining matches will be played behind closed doors and broadcast live on UK television, with 29 matches available on free-to-air. 

Sky Sports will broadcast 64 matches, including 25 available on free-to-air; ’s () BT Sport will show 20 live matches; Amazon Prime will show four matches; and the BBC will broadcast four live matches for the first time in the last 32 years. 

“The resumption of the EPL in June should be lapped up by fans, following a three-month suspension,” the analysts said. 

“This is potentially negative for ITV with some eyeballs shifting to live football,…



Read MoreWPP PLC and ITV PLC offer value as Citibank sees V-shaped recovery for advertising

0 0 vote
Article Rating
Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments
0
Would love your thoughts, please comment.x
()
x