One FTSE 100 stock that caught my eye recently is WPP (LSE: WPP). The shares have dropped, making it look even more attractive, in my opinion. Here’s why investors should consider snapping up some shares.
Communications, advertising, and PR
WPP is one of the premier communications, advertising, and public relations businesses in the world. With a worldwide presence in over 100 countries, it can count prestigious brands such as AT&T, Nestle, and GSK among its customers.
Lots of FTSE 100 stocks have seen their shares fall in recent months. This is due to macroeconomic headwinds including soaring inflation and rising interest rates. Current tragic geopolitical events have not helped markets either.
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WPP shares are currently trading for 744p, which is very similar to its price at this time last year, 747p. However, in 2023, they’re down 10%, falling from 834p to current levels.
The bull case
WPP’s solid position in its market is a major plus point for me personally. With a worldwide presence, coupled with extensive experience and lots of prestigious clientele on its books, this can help the business when looking to grow earnings, boost performance, and navigate challenges. When I think of how digital advertising is only increasing due to the enhanced adoption of tech, WPP is in a great position to capitalise.
Next, WPP has a good track record of performance. I can see since the pandemic that it has increased revenue and profit each year. However, I do understand that past performance is not a guarantee of the future.
Moving on, WPP shares would boost my passive income with a dividend yield of 5.4%. This is higher than the FTSE 100 average of 3.8%. Plus, the dividend looks well covered by 2.4 times earnings. However, I’m conscious that dividends are never guaranteed.
Finally, WPP shares look great value for money right now on a price-to-earnings ratio of eight. If the market recovers from its recent woes, I’d expect the WPP share price to head upwards.
A FTSE 100 stock with risks
Despite my bullish stance on WPP shares, there are a couple of risks to be wary of. The recent macroeconomic issues have led to marketing budgets being cut. This can impact the amount of money WPP makes, therefore impacting performance, sentiment, and returns. However, I view this as a short-term issue.
Next, spending in the tech sector has weakened considerably in recent times. This is a blow to the advertising giant as it has invested heavily in digital advertising for these specific purposes and businesses over the recent years. I’ll keep an eye on developments here but there is a good chance this will change in line with macroeconomic trends over the longer term.
To conclude, WPP shares look like an excellent opportunity right now. An enticing valuation, excellent profile and presence, as well as a passive income opportunity and a solid track record make it look like a FTSE 100 bargain to me right now.
