Fever-Tree Pops, WPP Shows Signs of Life

While the UK drink mixer maker secured the American dream, the Ad giant might be showing signs of a turnaround from lows.

Fever Tree Rises on Molson Coors Deal

The UK-based drink mixer company saw a 24% surge following the announcement of an exclusive distribution deal with Molson-Coors for the American market. The agreement involved the acquisition by Molson-Coors of an 8% stake in Fever-Tree for £71.0 million, which the British company reciprocated by initiating an identical share buyback programme. The partnership could expand Fever-Tree's operations in the US market, where it already generates over a third of its revenue and experienced a 12% increase in the previous year.

Shareholders and investors welcomed the deal, given the positive reaction, which suggests optimism about the prospects of the deal. The UK company is expected to provide a trading update in early February and may offer insights into the impact on its profitability. The market expects a notable increase in revenue through the medium term as a result of this partnership.

Has WPP Hit Bottom?

After hitting a top in mid-December, WPP saw a pullback in its stock price, but despite erasing all gains from last year, the company still managed to stage a recovery in late January. This raised questions about the potential for further upside ahead of its upcoming update. While WPP gained attention for its push to return employees to the office, investors seemed more concerned about the challenges posed by AI, slowing advertising demand and increased competition.

The recent drop in WPP share prices has led some analysts and traders alike to consider the company as an attractive opportunity in light of rumours of a potential US listing. The company generates 38% of its revenue in the US. Additionally, WPP has managed to reverse the trend of account losses and appears to be improving its operational performance. The merger of its rivals, Omnicom and Interpublic, could lead to higher client acquisition for WPP while they remain busy with the integration process.

WPP Falling Flag Pending?

The long-term price action suggests that WPP has formed a falling flag pattern, which may be confirmed at the upper channel near 900 pence. Currently trading around 765 pence following a preceding bullish leg at 680 pence, the stock could continue upwards before potentially reversing course at the peak. While the short-term pattern from 720 pence suggests further gains in the near term, the five-wave impulse from the top implies a reversal may follow lower. Resistance levels sit at 800 and 840 pence.

Source: SpreadEx / WPP

Key Takeaways

Fever-Tree has closed a favourable distribution deal with Molson-Coors for the American market, while the advertising giant WPP appears to be showing signs of a turnaround. After a substantial pullback, analysts are optimistic about its prospects, particularly in light of potential operational improvements and the merger of its rivals. Despite both companies being poised for potential growth in their respective sectors, potential challenges are on the horizon.