Investors in WPP have been showing concern that the British group intends to make a bid for Grey, which is valued at around £700m.
Some investors are concerned WPP could be caught up in a bidding war with Havas and private equity firms to win the US company, pushing the price for Grey considerably higher.
Morgan Stanley cut its share price target on WPP from 590p to 545p this morning. Its shares are currently trading at 471p.
"WPP's rating has been dragged down in sympathy with its US advertising counterparts, who have been hit by worries over dilutive share conversions," the bank said in a research note.
This will cheer investors, who are set to receive some positive news this week. Sir Martin Sorrell, the chief executive of WPP, is poised to reveal a leap in profits -- a further sign the advertising market has turned the corner.
According to reports, analysts are expected to disclose post-underlying pre-tax profits of between £211m and £230m, up by between 8% and 15%.
The Observer said interim revenues for WPP, the world's second biggest advertising group after Omnicom Group, are tipped to hit a record £2bn for the first time.
Sir Martin will confirm the ad industry has been given a lift by the US presidential race, which is proving to be the biggest-spending ever, the Euro 2004 football championships and the Olympics. The three events are thought to have given WPP a 2% boost.
On the opening day of the Olympics on Friday, US television network NBC confirmed it was set sell $1bn worth of advertising across its seven channels during the Olympic Games, netting the General Electric-owned station $50m.
However, Sir Martin is thought likely to indicate a significant improvement in Europe as well as the US, indicating the recovery is wider than expected.
Last week Grey Global reported pre-tax profits at its European operations more than doubled, suggesting WPP will also show much improvement in Europe.
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