RBC Capital downgrades Ted Baker, upgrades Superdry
RBC Capital Markets upgraded its stance on Superdry on Monday but downgraded its recommendation on Ted Baker as it took a look at premium apparel stocks.
Ted Baker was cut to ‘underperform’ from ‘sector perform’, with a revised 300p price target, down from 440p, as RBC updated its estimates following the 10 December profit warning and took a more cautious stance on the outlook for 2020.
RBC said the business is facing challenging trading conditions, which in turn are driving material earnings downgrades.
"Elevated debt levels may require addressing should conditions deteriorate further in 2020 or 2021," it said, adding that the senior management "appears light". This will need addressing with experienced replacements to assist the chief financial officer and chief operating officer to effectively steward the business, it said.
On the upside, however, RBC lifted it rating on Superdry to ‘outperform’ from ‘sector perform’ and nudged up the price target to 500p from 490p as it pointed to an "attractive" risk/reward following the pullback in the shares after the recent profit warning.
RBC said it was upgrading "in anticipation of better brand positioning and product offer from Autumn/Winter20" and that it reckons the building blocks are in place for a potential turnaround.
"We may be approaching the bottom of the earnings downgrade cycle," it added.
At 1010 GMT, Superdry shares were down 5.2% at 417p and Ted Baker was 4.4% lower at 366.04p.