Goldman Sachs starts WPP at 'sell'; Publicis, Omnicom initiated at 'buy'

(Sharecast News) - Goldman Sachs initiated coverage of WPP, Publicis and Omnicom on Wednesday as it took a look at the European media sector. The bank started WPP at 'sell' with a 240p price target, which implies around 14% downside.

It said: "Our cautious view is based on the following factors: (1) We believe it may be challenging for WPP to return to organic growth in the near term without a reshaping of its portfolio; while asset disposals could represent an upside lever, they would also remove associated earnings contribution, with the net EPS impact likely to depend on the valuation realised; and (2) we expect free cash flow to remain weak, with £500m of cost savings mostly offset by higher employee incentives (per guidance), investment and salary inflation."

The bank also said it sees unlevered free cash flow remaining broadly stable between 2025 and 2028 and forecasts £684m of free cash flow in 2028, versus Visible Alpha consensus of £710m and in excess of £1bn in 2022 and 2023.

"This implies WPP is trading on a 2028E unlevered FCF yield of 9% before any negative working capital movements," it said.

Publicis and Omnicom were both started at 'buy', with price targets of €110 and $146, respectively.

It said Publicis shares are pricing in a deceleration in top-line growth, driven by concerns around disintermediation by AI and that market share gains cannot be sustained.

"While we do not expect the market's view to shift in the near term, we are positive on Publicis, as we believe consensus is underestimating the pace of margin expansion and as we also see scope for the company to use its balance sheet to drive further earnings growth (we assume the company continues to invest in M&A at a typical EV/sales multiple (broadly in line with historical transactions), consistent with its stated strategy)," GS said.

As for Omnicom, Goldman said that following the completion of its merger with the Interpublic Group (IPG) in November last year, the company has emerged as the largest global marketing and communications holding company, with combined pro-forma 2025 revenue of circa $26.5bn and a leading position across the Integrated Media, Advertising, Public Relations, Health, and Experiential disciplines.

"We see three core drivers underpinning our positive thesis: (i) sustained organic growth of mid single digits in 2026-30E, driven by leadership in media, data and AI-enabled solutions; (ii) limited loss of clients post merger and an eventual recovery in account wins; and (iii) significant margin expansion from synergy realisation, enabling reinvestment in the business and a substantial capital return programme."

At 1318 BST, WPP shares were down 1.7% at 273.50p, Publicis was 1.4% higher at €86.28 and Omnicom was 0.3% firmer in pre-market trade at $75.45.