Broker tips: Ted Baker, Man Group, JD Sports

RBC Capital Markets downgraded its recommendation on Ted Baker on Monday as it took a look at premium apparel stocks.

Ted Baker was cut to ‘underperform’ from ‘sector perform’, with a revised 300p price target, down from 440p, as RBC updated its estimates following the 10 December profit warning and took a more cautious stance on the outlook for 2020.

RBC said the business is facing challenging trading conditions, which in turn are driving material earnings downgrades.

"Elevated debt levels may require addressing should conditions deteriorate further in 2020 or 2021," it said, adding that the senior management "appears light". This will need addressing with experienced replacements to assist the chief financial officer and chief operating officer to effectively steward the business, it said.

Elsewhere, Barclays downgraded Man Group as it reviewed UK and European asset managers.

Barclays downgraded Man Group to ‘equal weight’ from ‘overweight’ and cut the price target to 165p from 180p.

The bank said it continues to believe that Man’s institutional solutions-focused approach to alternative investments is differentiated and so should be able to benefit from the increased demand for alternative investment products.

"However, Man has been unable to achieve those flows through FY19 despite healthy investment performance, and the catalyst for meaningful fresh inflows is currently unclear," it said.

It also pointed to the stock’s more than 10% rebound since its mid-December lows as one of the reasons for the downgrade.

Lastly, analysts at Berenberg raised the target price on retailer JD Sports from 860p to 950p on Monday following another "impressive performance" against a challenging retail backdrop.

Berenberg noted that despite some early investor confusion and caution. JD Sports still upped its full-year profit guidance by around 4% in its largely qualitative Christmas trading statement and said the group's second half performance surpassed even its more bullish expectations.

"UK retail sentiment has turned negative following a number of retail profit warnings, but JD continues to stand out from the crowd," said the analysts.

"This continued strong momentum, alongside near-term profit tailwinds, suggests that more upgrades will come."

Capturing new guidance, the German bank raised its 2020-21 underlying earnings forecasts by 3% but, also cautioned that it saw up to 7% of further upside risk to its own estimates.

"We still believe relative valuation remains attractive versus global growth peers and we raise our price target to 950p," said Berenberg, which kept its 'buy' rating on JD Sports.