Broker tips: Cineworld, Oxford Instruments
Analysts at Canaccord Genuity lowered their target price on theatre operator Cineworld from 355p to 270p on Friday, noting the rough ride for investors may not yet be over.
Canaccord said it had been "painful" being a Cineworld investor over the last nine months and warned that it may get worse in the short-term, as its financial performance was impacted by a film slate that failed to deliver.
The Canadian broker Cineworld's stock was now the most shorted in the FTSE 250 - with 18% of the stock out on loan.
However, the analysts said notable poor admissions years were not uncommon.
"Looking forward, Cineworld's self-help agenda for Regal should continue to kick in as the Unlimited card gains traction and as the refurbishment programme gains momentum," said Canaccord.
Canaccord retained its 'buy' recommendation for Cineworld but lowered its target price to imply a 34% upside.
"Our new 270p target price is pitched just above the median of its US peers but well above AMC and well below IMAX, the two outliers.
The analysts also highlighted that further share price weakness could be the catalyst for a bid from Global City Holdings - the investment vehicle for the Greidinger family.
Over at Berenberg, analysts raised their price target on manufacturing and research company Oxford Instruments from 1,400.0p to 1,825.0p on Friday following "another stellar set of results" from the manufacturer of high precision equipment and tools.
Oxford Instruments delivered 11% growth in 2019 and 9% in the first six months of 2020, with all regions and markets contributing. However, with an appreciation for the more challenging backdrop, Berenberg assumes this will slow to a compound annual growth rate of 3%, although that "may prove to be too prudent".
In a nutshell, Berenberg stated the investment thesis had shifted at Oxford Instruments, with few investors now questioning its turnaround story.
Yet with the company's shares up over 70% year-to-date, the most pertinent question now was how much more there was to go?
"In our view, earnings can move higher still: our scenario analysis suggests 20% upside to our 2021 EPS forecast (9% organic, 11% M&A) and 33% upside to our 2022 EPS forecast (11% organic, 22% M&A)," said Berenberg.
The analysts acknowledged that the re-rating opportunity was now "more limited", but said the group was still 20% below its 2012-2013 peak rating. despite being "a better business" now and at a roughly 20% discount to "the sub-set of higher-quality industrials which it is moving towards."
"OI shares have rerated more than any other Industrial stock this year; however, if the company continues to deliver strong results as we expect then the discount to its higher-quality peers should narrow further," said the analysts.
"As a result, we continue to see upside from here and remain conviction buyers."