Broker tips: IAG, Hargreaves Lansdown, Flutter, Restore
Liberum upped its stance on British Airways and Iberia owner IAG to 'buy' from 'hold' on Wednesday as it argued that recent share price weakness offers an attractive entry point.
The broker, which kept its price target unchanged at 215.0p, said the path to recovery from the pandemic will be neither straight nor simple, but it is confident that air travel will make a convincing recovery in the medium term.
"We see IAG remaining a structural winner in the European industry, underpinned by strong liquidity in the short term," it said.
"Its strategic position is highly attractive, with the strongest slot position at Heathrow, the main airport for the largest and most attractive origin and destination in Europe, and leading positions in both the North Atlantic and South Atlantic markets."
Liberum stated to was "confident" that IAG can restore its margins and return on invested capital to pre-pandemic levels, potentially as early as 2023.
Analysts at Berenberg lowered their target price on investment bank Hargreaves Lansdown from 2,000.0p to 1,850.0p on Wednesday following the group's full-year earnings report earlier in the week.
Berenberg stated Hargreaves Lansdown's share price remained roughly 10% lower than it was before its full-year results on Monday, given larger-than-expected cost growth, weaker-than-expected net new business and continued client demographic changes.
Although the German bank said higher costs were "unhelpful", it believes that consensus adequately captured the likely client activity slowdown stemming from Covid-19 lockdowns and that HL's client base, which was 17% bigger year-on-year, can drive "meaningful value creation".
Berenberg also highlighted that retention was "critical", stating that many investors appear worried that brokerage activity will fall beyond consensus expectations.
"In our view, as long as client retention rates remain high, this concern is well hedged, assuming a progressively less active client within brokerage switches assets into funds," said Berenberg, which thinks retention will remain "solid".
RBC Capital Markets lifted its price target on Paddy Power Betfair owner Flutter Entertainment on Wednesday following the company’s half-year results a day earlier.
The bank, which kept its rating on the shares at 'outperform', increased its price target on the stock to 1,750.0p from 1,600.0p. When it upgraded the stock a couple of weeks ago, it argued the share price weakness of the last few months had been overdone and that fundamentals remained sound.
"Yesterday's interim results served to reinforce this message," it said.
Flutter said on Tuesday that first-half earnings rose 75% as the gambling group benefited from the acquisition of Stars in the US and restoration of sporting events as the Covid-19 crisis eased.
Flutter, which also owns Betfair and FanDuel in the US, said the second half had started well and it expected full-year earnings, excluding the US, of £1.27bn to £1.37bn assuming no further disruption from Covid-19.
Analysts at Canaccord Genuity nudged up their target price on information and data management firm Restore from 610.0p to 615.0p on Wednesday following the group's "strategically compelling acquisition" of PRM Green Technologies.
Canaccord, which reiterated its 'buy' rating on the stock, noted that Restore's acquisition of PRM was its fourth IT recycling and asset disposition business purchase in the last 12 months and further consolidated the group's "first mover advantage" in "a highly fragmented and attractive market".
"Restore expects PRM to be immediately earnings enhancing, and it adds greater scale in ITAD, expands the eCommerce offering and establishes a strategic presence in the valuable UK education sector," said Canaccord.
On another note, the Canadian bank stated that a recent approach by Marlowe was "a highly opportunistic move with no obvious synergies", with confirmation on Tuesday that no offer would be forthcoming bringing "early closure" to the matter.