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Shares in advertising giant WPP (WPP) are struggling, down 6% this morning as investors baulk at the nasty combo of a Q4 slowdown and disappointing outlook. Q4 revenue growth at its slowest since Q3’12 (2.1% year-on-year, organic) is blamed on a tough comparable period and both US and UK clients spending less; understandable, given the extent of political uncertainty on both sides of the pond and loss of major accounts like AT&T and VW.
Real concern, however, lies in such a slow start to the year (January 1.2%) and management guiding to slower revenue growth for 2017 as a whole (2% vs 3.1% in 2016 and 3% consensus). This suggests a worrying continuation of what it terms a “tepid” macro environment, clients “grinding it out in a highly competitive game” and a cooling of positive tailwinds. Not really what investors want to hear when shares are just shy of all-time highs. A profits warning of sorts.
Investors have clearly taken an opportunity to take profits off the table, sending the shares below 1820p 2-month support. However, 1792p is serving as support thanks to the 100-day moving average doing its bit. For now. Thereafter, it’s back to a 2016 rising channel at 1740p, its floor shared with the traditionally even more supportive 200-day moving average.
Mike van Dulken, Head of Research, 3 Mar
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