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The Expert View: Hargreaves Lansdown, AstraZeneca and Shire
Our daily roundup of analyst commentary on shares, also including Hammerson and Fidessa.
by Michelle McGagh on Feb 16, 2016 at 05:00
‘Rare opportunity’ to bag cheap shares in Hargreaves Lansdown
Online stockbroker Hargreaves Lansdown (HRGV) has been upgraded on the back of plans for a cash savings service.
Shore Capital analyst Paul McGinnis upgraded his recommendation from ‘hold’ to ‘buy’ but does not have a target price on the stock. The shares rose 4% to £11.75 yesterday.
‘We think Hargreaves Lansdown’s cash savings service, due to launch in H2 2016, has huge potential to attract new money to the platform,’ he said.
‘The deposit service shares similarities with the way that the platform market changed the way that funds were bought and sold. Existing Hargreaves Lansdown Vantage clients hold significant cash savings at banks.
'We think investors could be seriously underestimating the convenience factor offered by the service and we incorporate a revenue stream for cash savings for the first time.’
He added that the negative share price reaction which came following the interim results along with wider market weakness offer ‘a rare opportunity to invest in what we view as one of the highest quality business models anywhere in the UK market’.
AstraZeneca expected to shoot ahead post-2017
Pharmaceutical giant AstraZeneca (AZN) is expected to race ahead of its peers in terms of growth post-2017.
Deutsche Bank analyst Richard Parkes retained his ‘buy’ recommendation and target price of £57.00 on the shares, which rose 3% to £41.68 yesterday.
‘As one of AstraZeneca’s key growth franchises, consensus expectations for [heart attack drug] Brilinta sales growth from $619 million in 2015 to $2 billion by 2020 are a key bridge to ongoing generic headwinds,’ he said.
He added that clinical trials this year could ‘double the addressable opportunity for Brilinta and provide a further tailwind to consensus expectations’.
Parkes added: ‘We rate AstraZeneca at 'buy' given our confidence in a return to above peer group growth post-2017.’
Fidessa looking expensive as growth remains elusive
Financial markets software specialist Fidessa (FDSA) is looking expensive considering the lack of growth at the company.
Investec analyst Julian Yates retained his ‘hold’ recommendation and placed the £20.00 target price ‘under review’ following full-year 2015 results. The shares rose 9.1% to £19.32 yesterday.
‘Results and the c.4% growth outlook are in line,’ he said. ‘Derivatives grew 60% to £36 million, but will see only modest full-year 2016 growth due to the exit of a large customer. Combined with continued cash equity headwinds, it will limit group sales growth to low single-digits.
‘Fidessa flagged fixed income investment may happen this year which would mean another year of no progress in profits. Valuation supported by dividend, with the price/earnings ratio expensive given lack of growth.’
Hammerson ‘under review’ as yields ‘set to soften’
Property developer Hammerson (HMSO) has been placed ‘under review’ as analysts predict rental yields are set to soften.
Numis analyst Robert Duncan placed his ‘hold’ recommendation and target price ‘under review’ following full-year 2015 results. The shares rose 5.4% to 563.5p yesterday.
‘Loan-to-value has increased by four percentage points to 38% versus full-year 2014 on the back of investment activity exceeding disposals,’ he said.
‘At this point in the cycle... we do not believe that now is the right time to be gearing up and if we are right that yields are set to soften we would expect a reduction in market appetite for assets making it more difficult for Hammerson to degear.’
New drug from Shire could be a ‘blockbuster’
Shire Pharmaceuticals (SHP) faces some near-term pressures but dry eye disease drug lifitegrast could be a ‘blockbuster’.
Jefferies analyst Peter Welford reiterated his ‘buy’ recommendation but reduced the target price from £56.00 to £51.50. The shares rose 4.5% to £38.03 yesterday.
‘Revenues are largely unchanged but including (acquired company) Dyax boosts operational expenditure, reducing 2016-18 estimated earnings per share 5-8% for a c.14% compound annual growth rate,’ he said.
‘Our multiple-based price target is trimmed 8% to £51.50 from £56.00, given sector-wide compressed multiples and lower profits. The key upcoming catalyst is 22 July Prescription Drug User Fee Act decision date for lifitegrast in dry eye disease, which could enable Q3 launch of this potential blockbuster.
‘Reiterate 'buy' rating but near-term the Baxalta [acquisition] overhang may leave the stock range-bound.’
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Look up the shares
- Hargreaves Lansdown PLC (HRGV.L)
- Shire PLC (SHP.L)
- Hammerson PLC (HMSO.L)
- Fidessa Group PLC (FDSA.L)
- AstraZeneca PLC (AZN.L)