Broker tips: Pearson, WPP, Auto Trader, Travis Perkins

(Sharecast News) - Citi initiated coverage on a host of UK and European media stocks on Monday as it noted it was the worst performing sub-sector in the Stoxx 600 in 2025, underperforming by around 30%. The bank started Pearson, Publicis and Wolters Kluwer at 'buy', while Informa, Relx Group and WPP were all started at 'neutral'.

"The companies initiated on here averaged a 23% derating in 2025 while average consensus FY25E EPS growth forecasts fell 9% (-5% ex-WPP) and was largely FX driven," Citi said. "This suggests fear, not fundamentals, were the key driver of share price performance, due to perceived risk from the AI transition. We see the de-rating as a function of the potential for long-term end-market disruption.

"With AI uncertainty likely to continue, and determining a catalyst to disprove these concerns difficult, we opt for names where the AI de-rating looks overdone and the subsequent risk/reward is attractive."

Citi set a 1,300p price target for Pearson, €109 for Publicis and €125 for Wolters Kluwer. Relx and WPP were given price targets of 3,325p and 365p.

Berenberg slashed its target price for Auto Trader by nearly 20%, citing recent reports of teething issues with the rollout of its Deal Builder customer relationship platform. The broker lowered its target for the shares from 830p to 665p and kept a 'hold' rating on the stock.

Recent news reports have suggested the rollout of Deal Builder, which began last summer, has faced adoption issues with the car dealer community.

Deal Builder is the company's platform for car dealers that is built to attract committed, purchase-ready buyers and streamline sales conversations, allowing customers to complete as many of the steps of the sales process online before dealing with a dealer directly.

However, a recent survey by the Independent Motor Dealer Association even revealed that many dealers had already cancelled or reduced their packages with Auto Trader due to problems they have experienced with the platform, citing a loss of control over the sales process, and concerns about lead quality.

The reports prompted fellow broker Jefferies to downgrade its rating for Auto Trader from 'buy' to 'hold' last week.

"With Deal Builder acting as a core part of the pricing/product event on 1 April, and dealers' margins remaining tight, the issues are likely to affect [average revenue per retailer] growth in FY27, in our view," Berenberg said.

Berenberg now expects ARPR growth of just 5.2% over FY27, down from an earlier forecast of 7.5% and the consensus estimate of 7.8%.

"The shares now trade on a FY26E P/E of 16.7x, which is a c25% discount to the average of 22x over the last three years. Investors are likely to remain sceptical about these issues, reflected in a lower valuation, until Auto Trader can deliver earnings upgrades, in our view," the broker said.

Jefferies repeated its 'underperform' rating for Travis Perkins as it previewed the builders' merchant's annual results announcement next month, saying it expects full-year profits to miss forecasts.

The broker downgraded its rating from 'hold' just last month, ahead of the appointment of new boss Gavin Slark in January, saying that the stock's "elevated valuations leave risk/reward negatively skewed under the new CEO".

Ahead of Travis Perkins' results on 17 March, analyst Priyal Woolf said she expects the company to report a weak end to 2025.

"With the UK Budget known to have dampened UK construction, we expect LfL sales momentum to ebb into 4Q25, adding to our view that a FY25 profit miss looks likely and FY26 commentary may add more downward pressure," Woolf said.

"However, with FY25 the new CEO's first results, excitement about his initial strategic comments could offer some positive offset to sentiment, albeit we expect subsequent progress to be slow-burning while the market backdrop remains difficult."

The broker has a 531p target price for the stock.