JP Morgan downgraded Interpublic (IPG ) to long-term buy from buy.
Analyst Fred Searby says he's downgrading because revenue growth will be disappointing in the first half of 2002. He believes advertising agency revenue will suffer from a shift to fee-based revenue. He says, despite budding investor optimism regarding the media space, investors who are expecting a sharp tunaround in the overall media market may be disappointed; also, advertising companies will lag a media recovery by several months.
Searby believes, given the late cycle nature of the advertising business, Interpublic will not experience an upturn until 2003. He cut his first half revenue estimates and now expects 2002 revenue to fall 1.1% year over year to $6.65 billion. He also cut his $1.55 2002 earnings per share estimate to $1.49.