The Expert View: Marks & Spencer, Aveva and JD Sports
A roundup of some of the best analyst commentary on shares, including Dialight and Sinclair IS Pharma.
‘Disappointing’ M&S remains a ‘sell’
Investec’s Bethany Hocking is standing by her ‘sell’ rating on Marks & Spencer (MKS.L) after the retailer delivered a poorly-received update on its festive trading.
The worse than expected performance showed group sales increased by 0.6% during the 13 weeks to the end of December, with UK like-for-like sales down 1.8% in what chief executive Marc Bolland described as a ‘challenging and highly promotional General Merchandise market’. Food sales on the other hand were strong.
‘We had been (slightly) warming to the stock, but the statement demonstrates the size of the challenge ahead to stem the declines at M&S,’ said Hocking.
Meanwhile, analysts at Espirito Santo cut their rating to ‘sell’ from ‘neutral’. And Panmure Gordon were among analysts cutting their target price for M&S shares, though they noted that ‘Private equity interest may also now be piqued again’.
Shares in the group closed at 368.8p on Thursday, down 2.2p or 0.6%
Aveva share price strength questioned
Aveva (AVV.L)’s share price strength since interim results in November has been ‘surprising,’ says Merchant Securities analyst Roger Phillips who has downgraded his rating on the engineering IT group’s shares to ‘hold’ from ‘buy’.
‘Second half growth performance needs to improve compared with the first half, meaning there is potential for small downgrades,’ said Phillips, who has also cut his target price by 10% to 1980p.
He suggested Aveva’s recent share price gains might be due to hopes around the company’s new E3D product, but said it was unlikely to have any material impact in the short term.
‘Forthcoming Q3 IMS will be in-line at best, but that there is the possibility of small downgrades.’
Shares in the group closed at £21.35 on Thursday, 6p or 0.3%
'Buy' battered JD Sports, Seymour Pierce says
Freddie George, analyst at Seymour Pierce, has reiterate his 'buy' recommendation on JD Sports (JD.L) in spite of a disappointing trading update.
'Overall, the trading update for the seven weeks to 5th January is marginally disappointing impacted by poor results from Blacks, its outdoor business,' George said.
Following the update, George's 2013 pre-tax profit moves from £62.5 million to £61 million, taking earnings per share down from 87.9p to 85.8p.
Nonetheless, he believes the shares look oversold. 'The stock is the lowest rated in our universe and has a dividend yield of 4%, which we believe will not be cut because of the strength of the company’s balance sheet,' he said. 'We reiterate our Buy recommendation and our price target of 1000p, which puts the stock on c.11.0x FY13 forecast earnings.'
Shares in the group closed at 674.5p on Thursday, down 0.5p or 0.1%
Dialight shines for Canaccord
Investors can expect an ‘uplift’ in Dialight shares, said Canaccord Genuity analysts, after the US LED lighting specialist delivered an in-line trading update.
The company’s shares surged on Thursday after it reported that Lighting segment revenues have grown by over 70% versus the full year of 2011 and by almost 80% in comparison to the second half.
Analysts Jonathan Imlah and Bob Liao maintained their ‘buy’ rating on the shares. ‘Given the recent share price decline, simply meeting revenue expectations and its guidance of 30% drop-through should provide uplift to the shares,’ they noted.
‘Shares have been pressured over the past months. We believe today’s press releases should help provide support.’
Shares in the group closed at £10.60 on Thursday, up 45p or 4.4%
Sinclair IS still a ‘buy’ say Finncapp
Slightly lower revenues in the first half of the year at Sinclair IS were not enough to deter brokers Finncap, who have maintained their ‘buy’ recommendation on the pharma company’s shares.
Sinclair IS reported that revenues for the first six months to December were 2% lower than the same period last year.
However, Finncap analyst Keith Redpath noted, ‘Sinclair has disposed of products, and faced currency headwinds. On a like-for-like basis, revenues increased +4%.’
He added that ‘a renegotiated debt facility provides further firepower for acquisitions’
Redpath continued: ‘Improved margins and the growth in the dermatology and international businesses mean we leave our earnings forecasts unchanged.’
Shares in the group closed at 27.7p on Thursday, down 0.2p or 0.6%