Broker tips: Boohoo, Jupiter Fund Management, Antofagasta, Rio Tinto

Barclays has upgraded its recommendation for Boohoo, predicting that strong earnings momentum at the online fashion brand is set to continue.

The bank has an 'overweight' rating on the AIM-listed stock, compared to a previous 'equal-weight' rating. It also increased the price target, by 23% to 380p.

It said: "We believe Boohoo has a differentiated, cash-generative business model that delivers strong growth and impressive underlying operating leverage. We see room for consensus estimates to move up in 2021."

Barclays conceded it had missed some of the upsides on the stock, but argued that risk/reward remained "skewered positively".

"We expect earnings momentum to continue, and sit 4% [and] 10% ahead of Bloomberg consensus earnings before interest, tax, depreciation and amortisation in 2021 [and] 2022," said Barclays.

Last month, the retailer, which also owns PrettyLittleThing, upped its full-year revenue guidance after a bumper end to the year. In the four months to 31 December, total group revenues jumped 44% to £473.7m.

Canaccord Genuity cut its target price for shares of Jupiter Fund Management from 415p to 362p after the firm modified its capital allocation policy to include inorganic growth - before dividends.

The Canadian broker was projecting a payout ratio of 85% and 90% for 2020 and 2021.

That, analysts Portia Patel and Justin Bates said, was consistent without its historical target range, but now " shareholders must weigh up the value creation from potential accretive M&A against extraordinary distributions."

Since that will depend on the merits of the deals identified by management, at this point in time they could "flag only potential downside risk to our DPS forecasts".

"We value JUP at a 10% discount to the peer average to reflect this risk [resulting in a 2020 price-to-earnings multiple of 14.0], coupled with an uncertain net flow and EPS outlook, which results in a 362p target price, -1% TSR. Maintain HOLD."

Their projections were for flat net flows in 2020 and 3% growth in 2021, versus the 5% for both years which they had previously anticipated.

Market growth, on the other hand, was now pegged at 5% for 2020-21, whereas previously they had been expecting 0.0% and 5.0% growth.

The analysts also lowered their estimates for Jupiter's earnings per share in 2020-21 by 10% and 15%, respectively, to reflect lower net management fees and reduced scope for cost-cutting.

RBC Capital Markets cut its rating on both Antofagasta and Rio Tinto as the coronavirus outbreak weighs down global demand for commodities.

The bank has reduced the miners to ‘underperform’ from ‘sector perform’ and cut its price targets from 850p to 740p for London-listed Antofagasta and from 3,800p to 3,300p for dual-listed Rio Tinto.

Looking specifically at Rio Tinto, analyst Paul Hissey said: "Following an assessment of the impact from the coronavirus, we no longer expect a high iron ore price environment in the first half, and remove our tactical ‘sector perform’ rating. In a rebalanced iron ore market we see potential for compression in Rio’s equity value."

He continued: "We see a sharp drop in Chinese domestic iron ore production helping the market to stay balanced in 2020, which should also see an acceleration of demand in the second half. We lower iron ore prices by 6% in 2020 and increase by 8% in 2021."

In a note on Antofagasta, meanwhile, RBC analysts Tyler Broda and James Bell said: "Antofagasta faces the unenviable position of facing lower copper prices at a time of weaker grades and high requirement for capex.

"Although we think this counter-cyclical investment makes economic sense, it leaves the equity vulnerable over the coming 12 months."

Broda and Bell added that copper markets were currently "finely balanced" and that any positive changes to the fundamental picture could see copper prices rally.

Commodities have been under pressure ever since the coronavirus first emerged in Wuhan, China, at the end of December. China is one of world’s the biggest commodity importers, but the country’s economy is coming under pressure as the authorities look to contain the outbreak.