The Expert View: Marks & Spencer, Vodafone and Petra Diamonds
Our daily roundup of analysts' share recommendations and commentary, also featuring Sports Direct and Galliford Try.
M&S new web offering leads to Jefferies upgrade
Jefferies has upgraded Marks & Spencer (MKS.L) to ‘buy’ from ‘hold’ after it launched a new website which analysts described as ‘industry-leading’.
Analyst Caroline Gulliver increased the target price for the shares from 480p to 600p (current price 501p) following the launch of the website and in-house e-commerce platform.
‘M&S’s long-awaited new, and custom built, website was unveiled [on Tuesday] and, in our minds, it is impressive,’ she said. ‘The customer interface is significantly improved with more video content, 50% bigger pictures and a streamlined look.’
Gulliver said that despite the ‘patchy’ track record to sustainable sales and profit ‘we believe the combination of an improved website, and improved delivery offering (to come), a quality product range at attractive prices, improved UK consumer confidence, supportive FX moves and good operating expenses should lead to a step change in M&S’ operating performance’.
Vodafone: the return of value
Nomura analysts have increased their target price for Vodafone (VOD.L) shares as they ‘pre-empt the forthcoming return of value’.
Kunal Randeria maintained a ‘buy’ recommendation and increased his target price to 255p (current price 223p) as Verizon plans to buy-back the stake Vodafone has in Verizon Wireless.
‘We pre-empt the forthcoming return of value and adjust our forward share count to reflect the imminent share consolidation,’ said Randeria. ‘While we acknowledge that promoting Vodafone’s investment case in recent months has been akin to pushing water uphill at times (owing to failing estimates and FX headwinds) the strategic premium has been supported by the rising sector valuation.’
He added that the reinvestment potential for the cash windfall could see £4.5 billion ploughed back into Vodafone.
Petra’s blue diamond is ‘exceptional’ but will there be more?
The sale of an ‘exceptional’ 29.6 carat blue diamond that was found by Petra Diamonds (PDL.L) in its Cullinan mine provided a boost for the company as it sold ‘well above recent valuation for blue stones’.
Analyst Dmiry Kalachev, analyst at Canaccord Genuity, maintained a ‘buy’ recommendation and a target price of 163p on the shares (current piece 156p).
Although the stone, which was sold on Valentine’s Day, added revenue ‘straight to the bottom line’, Kalachev was cautious about the ability to mine more stones of this calibre.
‘Given the unpredictable nature of Cullinan producing stones of this quality, we do not explicitly include these stones in our forecasts,’ he said.
He added: ‘We view Petra as one of the best positioned pure diamond plays to benefit from the developing supply shortage in the diamond sector.’
Sports Direct in good long-term health
Sportswear retailer Sports Direct (SPD.L) may have suffered a Q3 slowdown in sales but Liberum has maintained its ‘buy’ rating on the basis of a positive long-term outlook.
Analyst Sanjay Vidyarthi placed a target price of 850p (current price 767p) on the shares, saying the slowdown in sales was offset by ‘strong gross margin expansion, which is key’. The company said it was ‘very confident of achieving its full year 2014 earnings before tax target of £310 million.
‘The company is on track to meet market expectations,’ he said. ‘We think this is a decent performance and we maintain our view that Sports Direct is well positioned to drive long term growth both in the UK and overseas.’
Galliford Try: strategy is sensible but there are better buys
Good interim results from homebuilder Galliford Try (GFRD.L) were expected considering the boom in the property market but Numis analysts believe there are better housing and construction buys out there.
Analyst Howard Seymour retained a ‘hold’ recommendation and a target price of £12.15 on the shares (current price £12.27).
He said the medium-term strategy for the company, which it set out in its interims, was ‘interesting’ as it plans to double 2013 profits before tax and earning and focus on a ‘disciplined expansion In volumes’ by 2018.
‘In our view [the strategy] looks sensible on the basis of steady recovery enabling management strategy to be fulfilled, and will provide the investor with a very attractive level of yield throughout,’ said Seymour. ‘That said, we believe there are more compelling valuations and growth stocks in both housing and construction which we favour, so while Galliford remains a favoured play we retain a hold recommendation on higher estimates and target price.’