Broker tips: JD Sports, AstraZeneca
Analysts at Berenberg upped their target price on 'buy' rated JD Sports from 700p to 800p on Wednesday, stating the group was in "a league of its own" while highlighting the retailer's free cash flow and telling clients worrying that they had 'missed the boat' that the stock's valuation was still impressive.
As JD Sports continued to go from "strength to strength", evidenced by another "impressive" performance against a challenging retail backdrop, Berenberg said that its initial "blue-sky" scenario for the group's US subsidiary Finish Line was looking more achievable.
The German bank pointed out that guidance upgrades at this stage of the year highlighted management's confidence, with exceptional momentum and near-term profit tailwinds suggesting that even more upgrades were still likely to come.
Bernberg's analysts raised their pre-tax profit forecasts for JD around 4% to capture the momentum, although its earning per share forecasts rose just 2% as a result of a higher tax rate.
Free cash flow forecasts, on the other hand, were hiked roughly 9% to reflect lowered guidance for capital expenditures.
"While investors may be forgiven for fearing they have missed the boat, valuation still remains attractive," said Berenberg.
Berenberg reached its new target price for JD after valuing the group on a 4.5% FCF yield, given its sector-leading cash generation and "superior earnings growth".
"This still leaves further upside from our blue-sky Finish Line/Footasylum scenario," said Berenberg, reiterating JD's stock as its 'top pick' in the sector.
Citi reiterated its 'buy' rating AstraZeneca on Wednesday, lifting the price target to 10,000p from 7,000 as it said the market continues to under-appreciate the commercial potential and operating leverage from drugs such as Tagrisso, Lynparza, roxadustat and Farxiga.
The bank's rating on AstraZeneca, which has been Citi's preferred global pharma major for the last five years, was reiterated for another year.
As well as upping its price target, Citi increased its earnings estimates 4-16% from 2023, putting it 28% above consensus.
"On Tagrisso, ADAURA and FLAURA2 will drive material increases in treatment duration and market size," it said.
"On Lynparza, we are excited by the potential in prostate, SCLC, NSCLC and tissue agnostic indications. On Farxiga, recent data validates our long-held conviction on cardio-metabolic potential."
Citi added that the regulatory outlook for Roxadustat remains encouraging following discussions with biostatisticians.