Broker tips: Aviva, Tullow Oil, Ocado
Analysts at Deutsche Bank reiterated their "high conviction" behind their 'buy' recommendation on Aviva's shares on the basis of its "highly attractive" free cash flow generation and their expectations for its future plans for deploying that cash.
"Aviva's upcoming full-year results offer the chance to refresh a story that really hasn't changed much for several months," analyst Oliver Steel said in a research note sent to clients.
Steel's forecasts called for Aviva to confirm expectations for up-front capital return at the higher end of the range of £5.0bn. However, the analyst added that what matters most will be Aviva's attitude towards future cash deployment.
DB, which said Aviva shares were trading on an expected 2023 free cash flow yield of 11.4%, against 7.1% across the wider, also bumped up its target price for the stock by 6% to 530.0p, adding that it was "arguably conservative".
Analysts at Canaccord Genuity lowered their target price on exploration firm Tullow Oil from 75.0p to 67.0p on Wednesday following the firm's recent trading update.
Canaccord Genuity said Tullow's update highlighted early signs of progress on the Jubilee field, with a welcome bump in production after last year's investment, but also showed the scale of the challenge facing operations at its TEN asset as production fell "more rapidly than expected".
"Certainly, the improved field management and higher/more reliable gas offtake and water injection are tangible positive signs, but the company is still only in the foothills of oil production rejuvenation," said the analysts.
The Canadian bank highlighted that in 2022, Tullow's investment continues to, unsurprisingly, be weighted towards its Jubilee field, with three new wells on its "most important" asset.
However, Canaccord also acknowledged that spending on TEN was now picking up, with two new "strategic" wells planned for the second half of 2022 that were not expected to increase crude output until 2023.
"Overall, we still think there is a lot to do to improve confidence in the long-term plan and this year is simply another step towards that goal."
Ocado surged to the top of the FTSE 100 on Wednesday after Credit Suisse upgraded shares of the online supermarket to 'outperform' from 'underperform' and hiked its price target to 1,750.0p from 1,500.0p as it argued that current levels offer a buying opportunity.
The bank cited greater confidence in the depth of existing partnerships after the launch of Ocado Re:Imagined and potentially higher TAM (total available market) for new and more flexible solutions.
CS said a share price correction of around 50% over the last 12 months reflects key risks and the bank's key concerns, suggesting limited downside.
It said the reimagined Ocado Smart Platform allows deeper relations with existing partners. Credit Suisse increased its existing partnership capacity by 20% and added another £2bn in sales with US-based Kroger.
As far as the broader TAM is concerned, CS said it expects the same capacity with new partners as before, but sees a higher likelihood of several - likely small - partnerships being signed in 2022-23, given that the new platform can be combined with in-house web solutions, does not require large customer fulfilment centres and requires less than $50.0m+ initial capex.