Broker tips: Greggs, WPP

Analysts at Berenberg raised their target price on bakery chain Greggs from 2,100.0p to 2,950.0p on Friday, stating the group was now "delivering the goods".

Berenberg, which also reiterated its 'buy' rating on the stock, acknowledged that Greggs shares had rallied "strongly" over the last six months. However, it still thinks that the strength of Greggs' recovery "more than warranted" the moves.

While the German bank admitted Greggs' shares were not necessarily "cheap", it also said delivery, in particular, could prove "hugely incremental" to the firm's "recovered" sales and could drive "significant upside" to its forecasts.

"Greggs currently trades at 23.7x 2022E P/E. We would note that it has a net cash position and an exceptional track record of earnings growth, which should support that multiple," concluded Berenberg, which transferred coverage of the stock to analyst Owen Shirley.

Credit Suisse upgraded WPP to 'neutral' from 'underperform' on Friday and lifted the price target to 1,060.0p from 835.0p as it argued that a record advertising recovery is overriding structural concerns.

"With both GroupM and MAGNA significantly increasing 2021 forecasts (to mid-teens) and predicting a record advertising recovery, structural concerns about agency holding companies have taken a back seat," the bank said.

"This could continue for some time as government stimulus and recovery in some pandemic-impacted sectors such as travel, telecom, media & entertainment and retail kick in."

Credit Suisse attributed the increase in the target price to earnings upgrades, the roll-over of net debt, and a rise in terminal growth to 1% from 0%.

The bank said the best way to gain exposure to the subsector is through Martin Sorrell's outperform-rated S4 Capital, "given its multiple levers for market share gain". CS said M&A alone could add around 45% to S4's EBITDA and 30% to valuation, on its numbers.