Broker tips: Bunzl, AJ Bell, WPP

(Sharecast News) - Exane BNP Paribas upgraded Bunzl to 'outperform' from 'neutral' on Tuesday and hiked the price target to 3,000p from 2,450p as it said the market has priced the company for permanent damage, but overshot. Exane BNPP said it met with Bunzl's chief executive last week and the meetings gave it increased confidence that the remedial actions and operational changes implemented in North America are bearing fruit.

"Execution issues in North America appear remedied - confirmed in our meetings with the CEO last week - and this de-risks the earnings base just as plastics-led inflation begins flowing through Bunzl's fast-repricing SME model," the bank said.

"On circa 9% free cash flow yield and priced for just 1% LT annual profit growth, the shares look too cheap."

It added: "The rebalancing of central-versus-local decision-making, leadership changes now bedded in, the more disciplined own-brand approach that has stopped alienating branded suppliers, and the pace of warehouse consolidation leave us more confident that execution problems of 2025 are now in the rear-view mirror."

Analysts at Deutsche Bank lifted their target price for AJ Bell from 600p to 675p on Tuesday as they updated the stock's valuation to reflect improved distribution economics.

Deutsche Bank said AJ Bell was deliberately investing more heavily in distribution, particularly in its direct‑to‑consumer channel, to drive future customer growth - a strategy the analysts said was delivering, with direct-to-consumer customer numbers rising 31% year-on-year in the first hald and 25% in FY25.

The German bank said the economics of this investment remained attractive, estimating distribution spend of around £314 per net new platform client in H1, compared with a typical D2C customer contribution of roughly £230 per year for eight-to-nine years.

DB, which kept a 'buy' rating on the stock, added that the approach was measured, with management still effectively running the business to a roughly 40% pre-tax profit margin, and supported by what it described as exceptional incremental revenues from transactional charges and interest on uninvested client cash.

Berenberg initiated coverage of advertising firm WPP on Tuesday with a 405p target price and a 'buy' rating.

The German bank said their 20-50% de-rating offers significant upside potential and attractive valuations, with double-digit free cash flow yields.

"While the industry continues to face long-standing headwinds from in-housing and rising competition, and more recently AI, we believe agencies are adapting rather than fading away - becoming increasingly important strategic partners and helping clients navigate a more complex and fragmented marketing landscape," it said.

"Previously the number-one advertising holding company, WPP has lost ground as peers pushed harder into data, technology and more centralised models, with WPP's declining sales, pressured profitability, continual restructuring and sharply lower market cap all reinforcing a negative narrative," it said. "We expect the new management team to deliver on the simplification process started by the previous team."

Berenberg said a return to positive organic sales growth and margin expansion from 2028 should support increasing dividend per share, offering a 7-10% yield, safeguarded by a 12-22% free cash flow yield in 2027-28.