Broker tips: MS, Coats, NCC Group

Berenberg lifted its price target on Marks & Spencer to 200.0p from 195.0p on Tuesday, as it highlighted a "strong" reopening recovery.

It said the retailer's ad-hoc trading update on 20 August indicated a robust recovery since the easing of restrictions.

"We think the continued momentum highlights the progress made to address its weaknesses, and we believe it is emerging from the pandemic a stronger omnichannel business," Berenberg said.

"In M&S' Clothing & Home division, e-commerce initiatives continue to drive strong online growth; in the Food division, instore sales outperformed the market, while the Ocado tie-up benefits remain underappreciated."

The bank, which rates the stock at 'buy', also forecast pre-tax profit slightly ahead of guidance, but recognised upside risk as workplace mobility recovers.

Analysts at Jefferies started coverage of Coats at 'buy' telling clients that the company's "attractive" suite of sustainable products should see it further bolster its position as market leader.

Key to its investment thesis, Coats, which supplies the fashion industry, had an early-mover advantage, according to Jefferies, having already spent years working on corporate sustainability.

Jefferies also pointed to positive drivers in place, which all told the analysts said would see Coats clock in with an organic revenue growth of 3.8% between 2022-24, up from the 2.2% pace seen between 2014-19.

Despite all of the above, the forward price-to-earnings multiple for Coats' shares was at a 50% discount to the sector, the analysts highlighted.

As a result, Jefferies set a 97.0p target price for the shares, which would see them trade on an EV/EBITA multiple of 12.4 times or a 22% discount relative to the sector "which is more in line with pre-Covid levels".

Analysts at Canaccord Genuity downgraded IT security firm NCC Group from 'buy' to 'hold' on Tuesday, citing valuation.

Canaccord, which did move its target price on the stock from 318.0p to 340.0p, upgraded its 2021-23 adjusted underlying earnings estimates for NCC by 8% and 2%, and pointed out that it expects to see a post-Covid-19 recovery in trading.

The Canadian bank also moved 4% and 0% ahead of the current consensus at the adjusted EBIT level for 2022-23, and in line for 2021.

Canaccord's analysts also highlighted that they were awaiting "more information" on NCC's first quarter and the integration of the IPM business in the firm's full-year results in September.

"At our target price, the price-to-earnings multiple is around 27x which is a circa 13% discount to the sector average (sector average around 31x December 22) and which, given the slightly lower revenue growth versus the sector, seems appropriate to us," said Canaccord.

"The upside risk might be that the IPM acquisition yields more synergies than we expect, but conversely, the risk to the downside could be that the integration proves more cumbersome than initially envisaged."