Broker tips: EasyJet, Schroders
Analysts at Canaccord Genuity slashed their target price on investment manager Schroders from 3,270p to 2,539p on Thursday, citing some near-term downside risks.
Canaccord highlighted potential downside risks to consensus forecasts, primarily on costs, but said if equity market performances played out per its base case, with the recovery post-crash set to be maintained in 2020, then action on staff costs would be "limited".
"Post the market correction, we have cut our EPS forecasts by 37% in both FY20 and FY21. We now expect the dividend to be maintained on the FY19 level of 114p through to FY22E, which is a 4.4% yield in each year," said the analysts.
As a result, the Canadian broker modelled a total comparative ratio of 47.5% in 2020, which it believes exceeds consensus.
However, while Canaccord noted that its bull and bear cases were "not symmetric" but rather reflected its research on how crises have developed in the past, it said even its downside scenario with the group's share price currently yielding 4.4%, that figure should provide ongoing support to the share price.
Canaccord maintained its 'hold' rating on Schroders.
Analysts at Morgan Stanley downgraded their view on Europe's main airlines from 'in line' to 'cautious' after concluding that the impact of the Covid-19 pandemic on the sector was set to last for longer.
EasyJet was downgraded to 'equal-weight' as " strong demand and yields, free option on holidays business and carbon emissions policy)has lost traction due to subdued demand and likely longer period for the holidays business to generate earnings for the group."
Since the 1960s, global airline demand had never shrunk by more than 3.3% in any year or 30% for any single month. In April 2020 however, demand was expected to fall by 90% and it remained to be seen how consumer behaviour might be changed.
Their base case was for demand to return to 2019 levels by 2022, although earnings would take until 2023-24 to fully recover, but the risks were still skewed towards a worse outcome as travel bans and social distancing could remain in place for longer.
Consensus estimates for 2021 were also still too high, in their opinion, leading the analysts to cut their target price on the firm from 1,800.0p to 800.0p.