Trading Idea: Publicis (PUB-FR)

We had an Enter Long Strategic signal on December 11, 2020, triggered by our system on Publicis, PUB-FR, the French Communication & Media company.

Our system also triggered an Enter Long Tactical signal on August 25, 2021 that imply a likely bullish acceleration. Publicis has a rather poor track record, with a Behavioral score of 1/10, therefore the bullish signal is to be considered as mainly Tactical.

Publicis is a 14.7 Bn market cap Company , andone of the world leaders in communication. Publicis operates in the digital transformation of companies, technology and consulting with Publicis Sapient, in advertising, interactive communication, digital marketing, public relations and events with Publicis Communications (Publicis Worldwide, Saatchi & Saatchi, Leo Burnett , Marcel, Fallon, BBH, etc.), in space purchasing and media strategy with Publicis Media (Starcom, Zenith, Digitas, Performics and Spark Foundry) and in health communication with Publicis Health (Publicis Healthcare Communications Group ; PHCG). Revenues break down by market between automotive (16%), finance (15%), technology, media and telecommunications (13%), food products (13%), health (12%), consumer goods (11%), distribution (8%), leisure, energy and luxury (7%) and others (5%).

Publicis is a leading advertising agency which has now fully recovered from the fallout caused by the COVID pandemic. Publicis is one of the 'big four' of advertising agencies, the others are WPP, Omicom and Interpublic. Publicis spent $4.4bn to aquire Epsilon (US Tech) back in 2019. This deal gave Publicis a great asset in "ad-tech", opening up access to a huge amount of qualified data, which can be translated into targeted marketing campaigns. The advertising's market size is still well correlated to economic growth, even in digital. So far, with an economic recovery in the US underway, the short term outlook looks promising.

Company’s metrics are now trending above the 2019 results. Publicis aims to generate a €1.2 to 1.3 bn free cash-flow in 2021.

The advertising sector is starting to bounce back tin the US and Europe, and Publicis looks relatively inexpensive (frward P/E at 14x) given its strong digital footprint and exposure to North America. While the market is a competitive one, Epsilon acquisition puts it in a strong position to deal with the structural changes that its industry is facing.

Short term catalyst : Recovery in advertizing, Epsilon acquisition.

This signal looks consistent with the Bullish relative momentum in the European Media sector, and a positive tactical signal on the European Media ETF. However, while the Strategic signal participation remains rather positive (62%), there is a lower participation in Tactical signals (29%).