Influential Wall Street analyst Brian Wieser has updated his outlook for the major agency holding companies he follows and boosted Publicis to a “buy” from a “hold” rating.
“With current trading levels 22% below [Wieser’s new target price for Publicis’ shares], we are upgrading our recommendation on Publicis stock to Buy from Hold previously. A bullish case can be made for Publicis for other reasons as well,” Wieser writes in a note sent to investors this morning.
Among other reasons for Publicis’ upside, Wieser cites the fact that investor sentiment is “overly negative” due to the holding company’s below-market performance during 2015’s record season of account reviews.
“This sentiment should reverse eventually,” Wieser explains. “What most investors don’t fully appreciate is that individual agency businesses can have many cyclical components. Beyond macro-economic or category specific factors, accounts may be won and lost in waves, with wins begetting wins and losses begetting losses until the cycle eventually ends.”
In addition, Wieser predicted a “reversal of fortune for Publicis’ media agencies, citing its recent reorganization under former ZenithOptimedia Group chief Steve King, which he said will lead to better media prices for clients through “improved applications of market intelligence and negotiating scale.”
While Wieser did not change his ratings for other agency holding companies, he cited mixed signals for Interpublic, Omnicom and WPP, and kept them each rated as a “hold.”Wieser said Interpublic had a “reasonably good year,” added that Omnicom “remains more of a 'black box' vs. peers, which should be a concern for investors;” and singled out WPP’s “unique strategic investments, including a combined Rentrak and comScore stake, as well as Globant, AppNexus, Vice and “dozens of other smaller companies.”