WPP's new plans offer clearer route to growth, but 2026 will remain tough, says analyst

Deutsche Bank cut its WPP price target to 425p from 510p but retained a buy after the group's FY2025 results and Cindy Rose’s 'Elevate28' strategy, saying the plan clarifies the path to mid‑term growth. The bank now forecasts like‑for‑like revenue down 5.9% in FY2026 (previously -3.5%), sees adjusted operating margin at 12.1% (down from 12.5%, within the company 12–13% guidance), and has trimmed adjusted EPS by 10% to 50.1p (vs 63.2p last year and 88p in 2024), citing further revenue pressure and full reinvestment of £100m of cost savings, leaving 2026 prospects weak and prompting likely consensus downgrades.

Analysis

Market structure: WPP’s guidance and Deutsche Bank cut crystallise a near-term winners/losers split — incumbent global agencies with heavy exposure to performance/tech fees (e.g., media trading houses) are losers as clients pull discretionary spend, while data/consulting-led units and smaller specialist boutiques could win share. Like‑for‑like revenue -5.9% and a 12.1% margin path imply pricing pressure and lower gross margins in H1 2026; expect ad‑buying spreads to compress and media suppliers to demand better payment terms. In cross‑assets, expect WPP credit spreads to widen 20–50bps, implied equity vol to rise 15–30%, modest GBP weakness on translation risk, and negligible commodity impact.

Key Decisions for Investors

• Establish a tactical 2–3% long position in WPP.L on weakness toward or below 425p (Deutsche Bank PT) with an 18‑month horizon; target 425p–510p recovery if Elevate28 shows early execution (net new business wins or cost reinvestment evidence), stop loss 15% below entry.
• Implement a relative‑value pair: long WPP.L (2%) vs short PUB.PA or OMC (1.5%) to isolate stock‑specific re‑rating risk; rebalance or close if spread narrows >10% or after 12 months.
• Buy a cost‑controlled options position: purchase a 12‑month call spread on WPP (long ATM, short +25% strike) sized ~0.5% portfolio to express asymmetric upside while capping premium; if holding equity, sell 3‑month covered calls at +8–12% OTM to harvest premium and reduce carry.
• Avoid increasing exposure to high‑beta adtech/media trading names for 3–6 months; rotate 1–2% of equity weight into defensive ad beneficiaries (large consumer staples retailers, telecoms) until Q1 trading update (monitor within 30 days for net new business and client retention metrics).