Broker tips: Qinetiq, BP
Analysts at Berenberg lowered their target price on defence technology company QinetiQ from 415.0p to 330.0p on Friday, but reiterated their 'buy' rating on the firm's shares despite branding it the "worst-performing defence stock" in its coverage so far this year.
Berenberg said Qinetiq had "significantly underperformed" since its first-half trading update after it disclosed two separate issues - a £15.0m write-down on a complex project and operational disruption in the US.
The German bank highlighted that Qinetiq's shares were now hovering around their 52-week low and had sharply de-rated since October to trade 25% below their two-year average enterprise value/underlying earnings multiple.
However, Berenberg also thinks the £400.0m fall in the company's market cap compared to a £27.0m cumulative loss in operating profit was "an overreaction to temporary problems".
"We view the current price as an attractive entry point into a highly resilient business model offering sustainable organic growth with upside from M&A," said Berenberg.
Analysts at Deutsche Bank upgraded their recommendation for shares of BP from 'hold' to 'buy' and raised their target price for its shares after upwardly revising their Brent oil price forecast for 2022 by 18% to $75 a barrel.
Deutsche conceded that "skittishness" following Omicron's appearance and concerns over potential oversupply of the oil market were understandable.
However, the expect the recent $12 per barrel drop in Brent over the preceding week would prove to be an over reaction in due course.
"On Omicron itself, if it causes enhanced lock-downs the mRNA platform offers a likely rapid vaccine response and OPEC has proven capable of managing supply as required over the last 18m," DB explained.
On the subject of the threat to demand posed by electric vehicles, DB commented that it was more of a post-2030 story, at the earliest.
All told, the German raised its target prices for the oil exploration and production names under its coverage by 14% and upped its target price for BP from 320.0p to 404.0p.