- This topic has 3 replies, 4 voices, and was last updated 3 days, 21 hours ago by
.
-
Posts
-
Anyone got any views on the WPP share price drop? I honestly can’t see it recovering. Sam Altman’s comments about AI replacing marketing seem to be becoming truer and truer as more brands adopt AI campaigns and even production. Plus, White & Case LLP sent me a note stating that “short-selling has returned to the UK market with a vengeance” WPP, having 6.27% net short positions.
Thinking of having a punt and buying some end of year 225 puts – currently around 47.75 offered…
UK advertising giant, WPP, was once a great British success story. It may be hard to imagine now, but WPP’s market cap exceeded £23 billion back in 2016.
But in the decade that followed, the company went from one mishap to another. Right now, the whole company is worth, roughly, only a tenth of its peak market cap. Some assume WPP has fallen into a “bargain territory”.
But the market disagrees. Based on WPP’s share price trajectory, which is pointing firmly downwards, the size of the marketing firm is set shrink further.
One reason is AI. Creative works that once took hundreds of hours to create can be done much more efficiently. Clients have noticed. Unsurprisingly, WPP’s revenue is stalling, as are its earnings. The fundamental case for avoiding WPP is clear.
What is less clear, however, is whether the stock will go a lot lower from here.
Remember the stock is already down 75% from its late 2024 peak at 900p. This persistent decline has attracted plenty of short sellers, who are betting on a continuation of this fall.
But the stock is oversold and near major levels (200p). Therefore I wouldn’t rule out a technical rebound in the months ahead.
This morning, Richard asked me what I thought about WPP. I was unequivocal in my response, saying that :
“I think it’s finished as it was/is. A smaller, more nimble biz might survive, but it seems more likely that AI-driven peers/start-ups will outmanoeuvre it”
I came to that conclusion nine months ago or more, when I came across a US TV ad that had been created using AI, for 95.0% less than the cost of a traditional production process.
I said then that it was a game-changer and negative for old school big media/ad makers, etc with the potential to reshape the AD-Tech landscape.
Of course, 9 months is an eternity in the world of AI and it’s becoming ever clearer that expertise and asset creation are no longer exclusive in the media.
See my LinkedIn post on the same https://shorturl.at/gQurz
WPP are down -62.0% in the last 52 weeks, and I can’t see what can stop them sliding further over time.
Taking a bearish view on WPP is probably the right call I think.
Generative AI is a huge threat to this company. Today, AI can develop marketing campaigns, do keyword research, write copy, and create marketing materials. So, there are major structural challenges here (Sam Altman has said that AI will replace 95% of marketing work). Looking ahead, I’d expect to see companies do a lot of their marketing in house using AI tools.
Turning to the company’s financials, they are very weak. For 2025, revenue was down 8.1% year on year on a reported basis to £13,550 million. Meanwhile operating profit was down 22.6% to £1,321 million (down 71% to £382 million on a reported basis). At the end of the year, adjusted net debt was £2,167 million versus £1,742 million a year earlier (this debt is an issue now that interest rates may stay higher for longer).
As for the technicals, they’re terrible as well. Right now, this stock is locked in a nasty downtrend. With brokers aggressively reducing their earnings forecasts for this year and next, the trend is likely to remain down. Zooming in on the short interest, it’s high at 6.5% (nine funds have declared short positions to the FCA), so institutions clearly see further share price downside.
Put all this together, and the picture doesn’t look good. I reckon there’s a good chance that the stock will continue to fall. That said, for those puts to pay off, you do need a significant drop in the next nine months and that’s not guaranteed. There is a chance that WPP could find some support around the 200p level.
- You must be logged in to reply to this topic.