Credit Suisse hikes target for Imagination

Credit Suisse hiked its target price for Imagination telling clients its strategic assets should generate a good level of interest from bidders.

Analysts at the Swiss broker revised their target for the shares from 100.0p to 165.0p, explaining that the company's assets, especially around graphics, "should generate a good level of interest from bidders".

However, in the same research note the broker predicted Imagination's ongoing dispute with Apple would drive it into high losses.

Under the assumption that its sales to Apple are cut by 60% in fiscal year 2019 before falling to zero the following year, then the company would become unsustainable without external funding.

Nonetheless, its strong suite of intellectual property and patents - particularly around graphics processors - was likely to drive interest from multiple semiconductor companies, especially those with exposure to mobile and automotive, the analysts said.

Their target price was based on a multiple of 6.0 times enterprise value to sales on the basis of their fiscal year 2020 estimates.

The broker stuck by its 'neutral' recommendation for the stock.