Broker tips: Ted Baker, CMC Markets

Analysts at Peel Hunt absolutely slashed their target price on fashion retailer Ted Baker from 950.0p down to 500.0p on Thursday following a far from "ordinary" profit warning from the group.

Earlier in the same session, the fashion retailer had announced that it had swung to an interim loss as it slashed its dividend and warned over its full-year results amid "very challenging" trading conditions.

Following June's "fairly substantial profit warning", Peel Hunt had expected profits to drop to around £15m for the first half, but instead, Ted Baker posted an interim loss of £2.7m before exceptionals and IFRS 16, which was "well short" of that forecast.

"Our primary concern is that the Ted brand is losing relevance in its target market and the price point is turning customers off," said Peel Hunt.

"Certainly, market conditions are tough, but others are performing much better. There's no customer backlash here, there's just a question of where are they shopping instead?"

The broker also said that while rectifying issues such as Ted Baker's now more expensive price architecture, lack of "newness" in its collections and heavy department store weighting to wholesale accounts was "doable" - they were far from "a quick fix."

"The question is how quickly management will grasp the nettle and drive creative direction?" said Peel Hunt, which kept its 'hold' rating on the firm unchanged.

Following the company's interims, Peel Hunt assumed less margin attrition in the second half, but its analysts more than halve their full-year underlying earnings estimates to £23m from £51.5m, with a further £6m impact from IFRS 16.

Analysts at RBC Capital Markets upgraded their rating on shares of CMC Markets from 'speculative risk' to 'outperform' on Thursday following the group's first-half pre-close update.

CMC Markets raised its forecast for full-year operating profits on the back of the "strong" net trading revenues observed during the first half of its financial year 2020 thanks to higher income from its technology business and higher sales from its white-label stockbroking business.

For the six months ended 30 September, the firm said revenues from its stockbroking business were expected to reach roughly £14.0m, up from £5.5m one year ago, driven by increased sales from the various white-label partnerships it had in Australia, of which ANZ Bank was the biggest.

RBC Capital Markets said that following a "challenging" 2019 trading year, CMC Markets' first-half update suggested a "strong rebound in profit", leading its recommendation for the firm's shares.

The Canadian broker also believed regulatory risks to the company's earnings trajectory were "more than reflected in the share price" and pointed to some "substantial" upside potential.

RBC, which bumped its price target on CMC up to 125p from 120p, highlighted an "encouraging" 150% increase in stockbroking revenue for CMC Markets, with white label partnerships in Australia said to be the key driver.

Lastly, the analysts pointed out that 2020 was the first full-year where CMC's ANZ transaction would positively contribute for the entire year.

"Following upgraded guidance, we have increased our 2020 stockbroking income in our model by 12%," said RBC.