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Stock Analyst Update

CEO Exit Has Little Impact On WPP's Prospects

Martin Sorrell's departure may hurt WPP's relationship with clients short term, but we think such an impact will be minimal.

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To our surprise, while the CEO of  WPP (WPP), Martin Sorrell, initially disputed the improper use of funds and personal misconduct allegations, the firm stated on Saturday that Sorrell is resigning, albeit he continues to deny the allegations. While Sorrell's departure may hurt WPP's relationship with clients in the short term, we think such an impact will be minimal given that Sorrell has not been as instrumental in winning new businesses as he was years ago. In our view, the firm’s narrow moat rating remains intact as WPP’s brand equity and the strong reputations of its ad agencies are based on the quality of services the firm continues to provide for its clients. This news does not alter our expectations of no organic growth for this year, which we think will be followed by 1% growth in 2019. We are maintaining our GBX 1,500 fair value estimate for this best idea name.

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Ali Mogharabi does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.