Broker tips: SSE, M&S
Analysts at Berenberg lowered their rating on energy company SSE from 'buy' to 'hold' on Thursday, stating the group's transition was now priced in.
Berenberg said having bounced back from its May lows, SSE's share price had responded well to an easing of political risks and the group's moves to focus on networks and renewables growth.
However, Berenberg, which did up its price target on the group from 1,280p to 1,350p, said these factors now looked to be priced into SSE's valuation.
The German bank said the change in price target was mainly down to higher forecasts for wholesale generation in later years, relating to power prices and renewables growth.
The analysts stated that they liked the group's shift to focus on networks and renewables generation through the disposal of most retail operations and a plan to sell its upstream oil and gas business.
Berenberg also highlighted that development of the group's renewables pipeline should also support longer-term earnings and dividend growth and said SSE's hydro and wind assets also provided "favourable leverage" to its bullish view on carbon prices.
"However, with networks facing lower returns under future UK regulation and lingering political uncertainties in the UK, the share price now seems to be up with events," said Berenberg.
Societe Generale upped its stance on shares of Marks & Spencer to 'hold' from 'sell' on Thursday and lifted the price target to 189p from 179p following the retailer's first-half results a day earlier.
The bank said the food performance was better than it expected, with the investment in price beginning to pay off in sales growth. In addition, it argued that execution in the clothing segment is improving, with much stronger availability and a couple of "encouraging indicators".
Finally, SocGen said the drop in the share price over the past year leaves M&S on a more appropriate valuation at 10x price-to-earnings, with the stock now trading below its discounted cash flow valuation.
On Wednesday, M&S said weaker clothing and homeware sales saw interim revenue fall 2% as it posted a 17% decline in pre-tax profit in "challenging conditions".
Clothing and homeware like-for-like sales fell 5%, reflecting "first half share of buy and supply chain issues," it said, while food LFL sales grew 0.9%, driven by volume.