Nearly 12 months after the first thoughts on AI, Oddo BHF draws up a first assessment of the subject. As part of this analysis, Oddo BHF considers Publicis to be less attractive in the sector, with a target of 77 E. WPP is the most attractive stock with a target of 1150p.

' It seems to us that 2024 should be a pivotal year and that the agency model should profoundly evolve thanks to AI. The current balances between headcount, sales, investments, margins and cash flow should have profoundly changed within 2 to 3 years' says Oddo BHF.

The analyst expects several changes as early as 2024. In order, we expect: a) an increase in investments in AI from 2024, notably via the development of AI platforms and securing access to GPU chips; b) significant productivity gains and therefore an acceleration of reorganizations and major restructuring charges from 2024; c) a reduction in branch headcount and therefore lower production costs; d) lower service prices for customers in light of productivity gains.

According to Oddo BHF, there could be renewed consolidation. WPP is holding a CMD in January 2024, which should be an opportunity to get many details on the strategy envisaged.

' It also seems likely to us that Publicis will use the presentation of its annual results to communicate on its plan around AI and the possible change of model ' adds the analyst firm.

Oddo BHF believes that AI will drive consolidation between major agencies

' In this irremediably deflationary context, we believe that some agencies could seek to join forces or acquire others in order to pool their investments (technological and restructuring), secure a leading position in the ' media ' market, facilitate their restructuring and thus increase their FCF '.

' Publicis could be a credible buyer. It enjoys a favorable valuation relative to its peers, thanks to its recent momentum. The group could seek to reproduce the pattern of 2013 when the merger with Omnicom was aborted. Interpublic and WPP could logically be targets, but could also be looking to undertake a tie-up. This is obviously only theoretical, but it seems to us that AI will irrevocably lead to consolidation between major agencies, and any move seems possible to us' notes Oddo BHF.

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