Pivotal Updates Ad Agencies Ahead of Q4 Earnings

Multiple ad agencies are facing concerns mostly due to the disruptions their core customers face. But at today's valuations, most ad stocks are fully pricing in concerns, according to Pivotal Research Group. 

The Analyst

Analyst Brian Wieser made the following rating and price target changes:

• Interpublic Group of Companies Inc IPG from Hold to Buy, price target lifted from $22 to $25.
• Nielsen Holdings PLC NLSN maintained at Hold, price target lifted from $23 to $25.
• Omnicell, Inc. OMCL maintained at Hold, price target lifted from $66 to $70.
• Publicis Groupe SA PUBGY from Hold to Buy, price target (Europe-listed stock) lifted from €53 ($60.82) to €61 ($70). 
• WPP PLC WPP maintained at Buy, price target (U.K-listed stock) lifted from 1030p to 1140p.

Interpublic Group

Interpublic is much better-positioned to offer data-related services to clients after acquiring Acxiom's AMS business, Wieser said in a Monday note. 

Excluding the acquired asset, the company can sustain its legacy business at or slightly better industry averages in the near-term, the analyst said. 

Nielsen

Nielsen's new CEO David Kenny is well-positioned to either guide the company forward or oversee its sale in an M&A deal, he said, 

If the company remains public, last year's woes — including a disastrous performance in emerging markets — can be "solved, Wieser said. 

Omnicell

Omnicell's divestiture of its Sellbytel business reduced its exposure to a large non-conventional agency business, he said. 

Investors will still be closely examining the company to understand its different revenue streams and limits on margin expansion versus peers, the analyst said. 

Publicis Groupe

Publicis' legacy Sapient assets give the company superior exposure to revenue from digital transformation versus any of its legacy competitors, in Pivotal's view. 

The company should be able to grow better than peers over the long-term, Wieser said. 

WPP

WPP's strategic update last month presents a "better view" of the company's outlook and its ability to expand beyond creative and media, he said. 

Yet investor concerns will likely stay throughout 2019, which looks "relatively bleak" and is marked by notable client loss, Wieser said. 

Price Action

The ad stocks performed as follows Monday: 

Interpublic Group: up 2.46 percent at the close. 

Nielsen: up 2.25 percent. 

Omnicell: 1.59 percent higher. 

Publicis Groupe: up 3.11 percent. 

WPP: rose 1.59 percent. 

Related Links:

Pivotal Downgrades WPP As Downside Risks Move To The Forefront

Goldman Sachs Lifts Sell Rating Off Nielsen Amid M&A Potential