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Shares in FTSE 100 media giant WPP (LSE: WPP) soared to over 1,900p in 2017, but have since slumped to around 500p.
We saw a brief recovery after the 2020 stock market crash. But WPP is the worst Footsie performer so far in 2025, losing a third of its value year to date. Hmm, maybe I should dust off my contrarian buy button.
What’s wrong now?
On 9 June the company announced the pending departure of CEO Mark Read, who took over from Sir Martin Sorrell in 2018. It seems he “decided that the time is right for him to hand over to a new leader and the search for a successor is underway“.
Does this sounds a bit sudden, and maybe not well prepared? I wonder if he’d have made the same decision had the company not just lost a $1.7bn Mars media deal? And if it hadn’t also lost big contracts with Pfizer and Coca-Cola? Some sources are suggesting his days were numbered.
But doesn’t it mean we should be considering selling WPP shares? And that I might be mad to think of buying?
Bad times make bad decisons
We’re currently still suffering from inflation and high interest rates. And we just heard that the UK economy shrank 0.3% in April. The US is in some turmoil too, with inflation fears rising on the back of President Trump’s aggressive approach to international trade.
This is surely a time when companies have higher priorities than marketing, advertising, and media spend. And that in turn must make short-term news a poor indicator of whether we should consider buying stocks in a sector like this.
And isn’t that when contrarian investors who see long-term attraction should think about jumping in and buying, while a stock is down?
What are the attractions?
There’s a forecast dividend yield of 7% at WPP, boosted by the fallen share price. Locking in that kind of return could be nicely profitable. But it depends on whether the dividend is likely to be sustained.
Forecasts currently suggest it will be, at least until 2027. And that it should be solidly covered by earnings. Analysts also think earnings will grow in the next three years. But I wonder if they might be a bit out of date now and could scale back when they get their heads round the latest outlook? That’s a danger.
Most brokers have WPP as a Hold, despite setting a price target range of 520p to 740p — with the shares at 550p at the time of writing. It suggests their thoughts are dominated by uncertainty right now and they don’t want to commit.
What to do?
WPP needs to respond to a changing business. And it’s one in which artificial intelligence (AI) is likely to play an increasing part. Could that open competition to leaner and smarter AI-based operations? It’s possible WPP could go the way of dinosaurs.
But experience built up over decades should still count for a lot. And for those who see a profitable long-term future for this kind of business, WPP surely has to be one to consider for a potential (risky) recovery buy.
This story originally appeared on Motley Fool
