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Stock Strategist

WPP Focuses on Integrating Tech and Creativity

We think the ad holding company continues to differentiate itself.

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WPP (WPP) highlighted its data, technology, and creative capabilities during its recent analyst day. While the narrow-moat company has not made aggressive acquisitions on the data and data management front (unlike peers Interpublic (IPG) and Publicis), it has access to first- and third-party data through its clients and various partners, including Kantar, which WPP sold to Bain Capital. Regarding technology, management remained confident in WPP’s chances of winning accounts when facing consulting companies. The company also highlighted the enhancement of its creativity by further investing in artificial intelligence. In our view, that know-how combined with the company’s long-standing leadership in creativity, which has helped strengthen its brand equity moat source, will continue to differentiate WPP.

We think WPP is well positioned to benefit from continuing growth in online ad spending. It and its peers may also benefit from the increasing demand for data privacy and security. Management did not touch on fourth-quarter results or 2020 guidance; it will publish its earnings in late February. We have not made any adjustments to our model or our fair value estimate. This 4-star stock increased nearly 34% in 2019, above the S&P 500’s 29% and the Communication Services Select Sector SPDR Fund’s 31%.

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