Investors sent shares in STW (SGN) down 7.55 per cent, or 8c, to 98c, during intraday trading after the group warned it would likely miss guidance due to weaker-than-expected client commitments for spending in November and the final weeks up to Christmas.

The operator of the local operations for world-famous Madison Avenue advertising agencies, including Ogilvy and JWT, now expects calendar year 2014 net profit after tax to fall between 1 to 5 per cent year-on-year to as low as $47 million.

The revised guidance is below consensus forecasts of $51.6m.

While the final quarter of the year had been disappointing, STW chief executive Mike Connaghan said the business had shown “positive momentum” during the seasonally stronger second half, winning new work and retaining key client mandates.

But despite the profit warning and the risk of a further deterioration in demand for advertising, Deutsche Bank analyst Dominic Rose retained his buy valuation, arguing the stock was undervalued.

WPP, the world’s largest advertising group by revenue, has forecast the Australian advertising market to deliver a lift of just 2.8 per cent to $13.1bn after the post 2013-election bounce in consumer confidence stopped after the May federal budget announcement.

The budget lowered consumer sentiment, which caused advertising budgets to contract over the short term, with conditions becoming choppy and ever shorter in terms of advertising bookings.

But WPP said the local market would lift 4.1 per cent to $13.7 billion next year, the biggest improvement since an 8.7 per cent spike in 2010.