We're Lifting Our Price Targets for These Two Financial Holdings

In the past, we’ve experienced the phenomenon of “Merger Mondays,” which tends to denote a wave of M&A activity as we start a fresh trading week. Why Mondays? Because deal progress can advance over the weekend when the market isn’t open, and financial media tends to be relatively quiet. In some cases, a handshake agreement is struck before the deal is consummated on a Monday. That pattern explains why we tend to hear rumors and speculation about M&A deals on Sunday evenings only to see them unfold on a Monday or a few days later.

That’s exactly what happened with the Omnicom OMC and Interpublic IPG deal that will create a powerhouse of an advertising company that has the potential to reshape the industry. The combined entity would have a net revenue of more than $25 billion, based on 2023 figures for each company, with almost two-thirds of the year-to-date revenue from media, advertising and precision marketing. The transaction is expected to generate cost synergies of $750 million.

Group M’s Outlook Keeps Us Bullish on These Holdings

As we consider the implications of these two companies being put together, we are seeing our shares of Trade Desk TTD and Meta META trade off, likely due to initial concerns over how the new Omnicom will impact spending. While the new Omnicom will have greater scale, data from Group M, WPP’s media investment group, sees pure-play digital advertising remaining as the strongest channel and is estimated to grow 12.4% globally in 2024 and rising 10% next year to account for 72.9% of total advertising in 2025. Stepping back, Group M sees the global advertising market reaching $1.04 trillion this year, excluding the impact of U.S. political advertising, and growing 7.7% next year to hit $1.1 trillion. That implies a pure-play digital advertising market of more than $800 billion.

We see that forecast supporting our current price targets for META, TTD and Alphabet GOOGL shares, but also driving the advertising businesses at Amazon AMZN and Apple AAPL.

Lifting Our Morgan Stanley, Bank of America Price Targets and Panic Points

In reading the Omnicom-Interpublic materials, we’re able to follow up on Monday's Daily Rundown video comments and share that Interpublic was advised by Morgan Stanley MS. This is another feather in the firm’s M&A cap and paired with the latest equity market inflow data, we’re lifting our MS price to $140 from $130. Per LSEG Lipper data, investors pumped a robust $21.8 billion into global equity funds during the week of December 4, the biggest amount since the week of November 13, which marked the largest weekly inflows in over a decade.

As we make that move, we’ll also nudge our Bank of America BAC target to $53 from $51 ahead of its presentation at the Goldman Sachs U.S. Financial Services conference on Wednesday.

We will also lift the respective panic points for MS and BAC shares to $110 and $39 from $104 and $38.

Should we see signs of investment banking activity heating up further or we see some favorable developments emanating from Goldman’s Financials conference this week, we’ll revisit our MS and BAC price targets as needed.

Other M&A Activity on Monday

Arthur J. Gallagher said that it has agreed to acquire insurance broker AssuredPartners in a $13.45 billion deal, as it looks to bolster its presence in the vast and fast-growing middle-market segment.

Reports indicate that Mondelez MDLZ has broached Hershey HSY about a takeout bid with negotiations in the early stages. Hershey rejected a 2016 bid by Mondelez and, as we consider the potential for a deal this time, we have to consider Hershey’s dual-close stock structure, including common stock and Class B common stock. Class B common stock, which is not publicly traded and is mainly held by the Hershey Trust, each carries 10 votes, giving the trust "substantial" control over corporate decisions. Historically, the Trust has controlled about 80% of the voting power.

Independent Bank INDB, parent of Rockland Trust Company, and Enterprise Bancorp EBTC, parent of Enterprise Bank and Trust Company, signed a definitive merger agreement under which Enterprise Bancorp will merge into Independent Bank and Enterprise Bank will merge into Rockland Trust. Following the merger, Rockland Trust will have about $25 billion in assets and $8.7 billion in wealth assets under administration.

More Pro Portfolio

• We're Locking In a Triple-Digit Gain for This Deeply-Overbought Name
• Weekly Roundup: A Lack of Fear Is Concerning as the Market Melts Up
• Half of U.S. Living Paycheck to Paycheck — and More Headlines You Might Have Missed

At the time of publication, TheStreet Pro Portfolio was long TTD, META, GOOGL, AMZN, AAPL, MS and BAC.