Jefferies upgrades Ted Baker to 'buy'

Jefferies upgraded Ted Baker to ‘buy’ from ‘hold’, but cut the price target to 3,000p from 3,400p in line with the sector de-rating of around 12%.

“We believe Ted’s c40% de-rating of the past five months, compared to 11-13% of the sector, is a disconnect to what remains a strong growth profile at the British brand.”

Jefferies said that having seen Ted report a softer end to FY16, and with consensus expectations now rebased towards a more normalised growth profile, it is able to be more constructive on the brand’s differentiated proposition.

The bank reckoned Ted Baker will continue to outperform its peers with around 15% top-line growth, supported by a healthy order book, differentiated business model and continued international expansion.

“The brand's quirkiness, quality offering at affordable prices, nimble business model and international expansion potential remain attractive features of the group.”

On Jefferies’ estimates, Ted offers three-year earnings per share compound annual growth rate of 16%, moderating from 21% in the past three years but still superior to peers at 11%.

At 0818 BST, Ted Baker shares were up 3.1% to 2,491p.