Communications
Craig Huber sees IPG as one of the most mispriced stocks in his coverage, with ~50% upside to his new $38 TP, based on the 0.344 Omnicom exchange ratio and a $111 TP for OMC. He has raised his 2025/26E adjusted EPS estimates by 12-13% on stronger margin expectations - now +100bps in 2025, driven by $300m in cost savings. IPG trades at just 8.2x 2026 EPS - a steep discount to the S&P 500. The OMC merger remains on track for 2H25 and is expected to yield $750m in cost synergies, which Craig believes will prove conservative. With OMC trading at just 6.2x pro forma 2027 FCF (including IPG), he sees a compelling entry point for long-term investors.
Edition: 217
- 08 August, 2025
WPP (WPP LN) UK
Communications
Doug Arthur comments on UK media reports suggesting Accenture and WPP have held preliminary talks about a potential transaction. The timing aligns with WPP’s appointment of Baiju Shah - Accenture Song’s former Chief Strategy Officer - to lead its struggling digital agency, AKQA. While ACN has rapidly built the world’s largest digital marketing platform (pre the planned merger of Omnicom and Interpublic), WPP remains challenged, with its stock near 20-year lows, FCF yield close to 16% and a 4x EBITDA multiple. Doug acknowledges the scepticism around a deal, but a buy-low strategy on WPP would quickly catapult ACN atop a consolidating industry. Stranger things have happened.
Edition: 216
- 25 July, 2025
Communications
“Contract Assets” have continued their trend upwards, jumping from 41 days to 45 days of sales. “Unbilled fees and costs and contract assets” have seen a huge increase, rising by 50% to $1,017m in the last 9 months. This is a sizeable balance of "unbilled" revenue sitting on the balance sheet and compares to "Advertising and Media" total revenues of c.$2bn in the last quarter. This seems unusual, particularly in the context of the company's claim that “substantially all unbilled fees and costs will be billed within the next 30 days”. Forensic Alpha considers this one of their more important flags in terms of identifying aggressive accounting and it is particularly concerning for OMC given that revenue recognition was one of the "Critical Audit Matters" raised by its auditor.
Edition: 198
- 01 November, 2024
Communications
Q1 organic revenue growth beats expectations and management raises the bottom end its 2024 guidance range to +4.0-5.0%, reflecting confidence in the current business performance and outlook. This is on top of 4.1% organic growth in 2023, despite geopolitical and macro uncertainty. Investors who argue that the industry is facing perpetual declining organic revenue growth continue to be proven wrong. This GARP stock looks highly undervalued trading at only 11.6x/10.8x 2024/25E GAAP EPS (43% discount to S&P 500 vs. more modest 25% average discount the prior 10 years using Street consensus estimates), 8.6x/8.2x EBITDA and 10.7x/9.9x FCF.
Edition: 184
- 19 April, 2024