Ad Agencies: IPG, NLSN, OMC, PUB, WPP: Updates Ahead of 4Q18 Earnings -- Pivotal Research Group

Our fundamental views are generally unchanged on stocks referred to in this note, but relatively low stock trading levels vs. those YE2019 targets cause us to upgrade from Hold to Buy both IPG and Publicis, which have $25 and €61 price targets, respectively. At the same time, WPP's price target is raised to 1140p and we maintain our Buy recommendation on that stock. Nielsen's price target is raised to $25, which leads us to maintain our Hold recommendation. We are similarly raising our price target on OMC to $70 but also maintain a constant Hold rating.

Additional commentary on each of these companies follows in this note.

VALUATION. We value companies on a DCF basis. Key variables driving valuations across the agencies include long-term costs of capital of 13.0% and long-term growth ranging from 3.0% (for OMC) to 5.0% (for Publicis).

RISKS. Risks relate to squeezing fees from clients, competition from adjacent industries, reduced competition between marketers and demand for advertising services.

FULL REPORT INCLUDING RISKS AND DISCLOSURES CAN BE FOUND HERE: Agencies 1-7-19.pdf

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