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If I think a FTSE 250 conversion story, WPP (LSE: WPP) immediately springs to mind.
He was once a heavyweight e FTSE 100 indexThe global advertising group has fallen deeply from grace. But after a year of punishment, there are early signs that it may be gearing up for a comeback.
What happens to the share price?
There is no doubt that the company’s shares are aging. Over the past 12 months, the stock is down nearly 53.1 percent as of writing on January 9 as investors lose confidence in the company’s outlook.
Falling advertising costs, profit warnings and lost customer contracts caused a wave of sales. But interestingly, in the past month alone, the share price has rebounded by 8.2% as value hunters begin to circle.
Today, shares are changing hands at around 343p, giving the stock a price-to-earnings (P/E) ratio of 10. That is much lower than the average of the FTSE 250 and may suggest that its price in many bad news already.
The next dividend yield sits at a punchy 9%, but will drop from those highs given the 50% pay cut in August 2025.
2025: the year to forget
Last year was brutal for the company and its shareholders. Advertising budgets have tightened amid economic uncertainty, affecting WPP’s main revenue streams.
The company has also been slow to adapt to changing customer demands, losing out to more agile competitors who have embraced digital marketing and data-driven rapidity.
In October, the company issued a profit warning and confirmed the departure of CEO Mark Read. That was followed by the news that WPP would exit the FTSE 100 for the first time in decades.
Could a recovery be on the cards?
Despite the sad background, there are reasons for cautious optimism. New CEO Cindy Rose has signed a clear intention to streamline operations, focus on growth areas and rebuild investor confidence. That includes doubling down on AI-enabled marketing platforms and strengthening WPP’s position in high-demand areas such as data analytics and digital strategy.
Recent reports also suggest the company has secured several new contracts, including a UK government contract worth up to £2bn announced in December. That alone should give investors some confidence in the company’s ability to win and keep customers.
At the same time, the current valuation may be attractive to long-term investors who are willing to take a return view. With such a steep fall already, any signs of improved performance or revenue stability could give the share price room to run.
My decision
WPP is certainly not out of the woods. Major challenges remain, from intense competition to questions about its sustainable profitability. Any investor considering stocks should be comfortable with the high risks of long-term volatility, but that’s the nature of the beast in value investing.
However, this is still a global brand with deep customer relationships and a long history of success. If management can implement its strategy and harness the power of AI and data in 2026, then stocks could look cheap in retrospect.
While I wouldn’t bet on WPP in 2026, it may be one for investors considering the possibility of a FTSE 250 recovery to take a closer look at.
