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The Expert View: Lloyds, Asos and Rightmove
by Harry Brooks on Aug 12, 2013 at 05:01
A roundup of some of the best analyst commentary on shares, also including Britvic and Cobham.
Our daily round-up of analyst recommendations and commentary, featuring Lloyds, Asos, Rightmove, Britvic and Cobham.
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Morgan Stanley upgrades Lloyds
The improving outlook for the UK's housing market and a rising level of capital accumulation has persuaded Morgan Stanley to upgrade Lloyds (LLOY.L) from from 'equal weight' to 'overweight'.
Evidence of the improving housing market's positive effect on the bank is already starting to emerge, analyst Chris Manners said, with loan volumes rising under the influence of the government's Help to Buy scheme.
Manners also said Lloyds is well placed to build its capital faster than many of its rivals: 'We expect deferred tax assets (£5.6bn) and insurance deductions (£3.8bn) are likely to become significantly reduced as the equity base of Lloyds grows and the increased size of the 10% threshold means the deductions shrink,' he said.
The analyst upgraded Lloyds to 'equal weight' in November 2012, and he acknowledged that in retrospect an 'overweight' stance would have been more rewarding given the steady rise in the shares.
'We are mindful of the sharp increase in the share price year to date, but taking a fresh look at the Lloyds equity story, we conclude that there is still substantial value in a European banks context,' he added, lifting his target price from 70p to 93p.
Shares in the group closed at 75.2p on Friday, up 1.2p or 1.6%.
Asos can hit £60, UBS says
UBS has increased its target price for Asos (ASOS.L) ahead of next month's fourth-quarter update, saying the online fashion retailer still has a winning formula with room to grow in overseas markets.
'We expect Q4 (19 September) to slow slightly from Q3 against a mildly toughercomp but still deliver a total 37% retail sales growth with a healthy circa 100 basis point gross margin tick up,' analyst Adam Cochrane said.
Rising spending on launching and advertising operations should begin to reap rewards within the next couple of years, he added.
'With online pureplays and multichannel retailers improving their own offers, the ASOS strategy to continuously improve the customer offer across geographies is paramount for sustainable market share gain and sales growth,' Cochrane said.
His target price jumps from £46 to £60.
Shares in the group closed at £48.80 on Friday, down 8p or 0.2%.
Rightmove powers on, but Zoopla gains ground
Westhouse has increased its target price for Rightmove (RMV.L) on the back of last week's encouraging interim results.
Revenues over the past six months rose 16% year-on-year, and adjusted pre-tax profits were up 15%. The interim dividend rose 22%.
'We have increased our FY2013E earnings per share/dividend per share estimates by 3%/6%, respectively and rebased our target price to 2,570p to better reflect this momentum, strong cash flow and substantially superior growth prospects vs. other media companies,' analyst Roddy Davidson said.
'One note of caution is that Zoopla appears to be gaining some traction by offering a substantially cheaper service,' he added.
With the shares currently having around 7% upside to his target price of £25.70 (previously £17.93), Davidson reiterated his 'neutral' recommendation.
Shares in the group closed at £23.93 on Friday, down 31p or 1.3%.
Nomura lifts target price for Britvic
Nomura has increased its target price for soft drinks maker Britvic (BVIC.L) on news it's going to roll out its Fruit Shoot brand in 32 US states.
Analyst Ian Shackleton said now a deal's been reached with Pepsi's bottlers there's no need to dismiss the income stream from the 'asset light' venture.
'We had previously included a notional 30p of value from this roll-out in our target price of 580p; we believe that it is now more realistic to include 80p of value (about one-third of the potential value from the announced franchises), taking our target price to 630p,' he said.
If the Fruit Shoot brand becomes as popular in its franchise markets of the US, Spain and India as it is in the UK that could add 260p of value per share,' Shackleton added.
Shares in the group closed at 559.5p on Friday.
JP Morgan lifts target price for Cobham, stays at 'neutral'
JP Morgan has increased its target price for defence contractor Cobham (COB.L) even though the latest trading update again points to a decline in annual earnings, arguing things will pick up next year.
Cobham's first-half trading update said it's sticking with its guidance of a 4% year-on-year decline in earnings per share (EPS). The main points made in the update were that the senior management team is being beefed up, and the group's confident of completing more acquisitions.
'The last few years have been challenging with 2010-2013 organic growth declining 1% pa and no EPS growth,' analyst David H Perry said. 'Organic growth, enhanced by M&A, would make the shares more appealing.'
However, with the US defence spending outlook still highly uncertain, he's sticking with a 'neutral' recommendation for now. His target price rises from 255p to 310p.
Shares in the group closed at 295.1p on Friday, down 0.5p or 0.2%.