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Broker Spotlight brings some of the more intriguing and topical analyst coverage to centre-stage. The daily column aims to illuminate thoughts and opinions behind the big stories. London is one of the financial capitals of world. The influential and closely followed views of its analysts regularly move markets and split opinion. The Broker Spotlight column arms Proactive readers with the added insight from the often colourful thoughts and headline-grabbing valuations from the City’s analyst community.
Broker Roundup Part 1 including: Barclays, GlaxoSmithKline, Shire Pharmaceuticals, Morrisons and Ladbrokes
July 03 2012, 1:30pmBarclays (LON:BARC) and GlaxoSmithKline (LON:GSK) are hitting the headlines for the wrong reasons this week as both admitted to wrongdoing within their respective industries.
Barclays’ chief executive Bob Diamond finally succumbed to pressure to resign over the libor scandal today while heavyweight broker Deutsche Bank (DB) downgraded the bank following the resignation of its chairman.
Marcus Agius said he would step down as chairman yesterday but has today returned to find a suitable replacement for Diamond.
The broker moved the bank to a ‘hold’ recommendation from ‘buy’ as the libor scandal continues to add risk to the stock. However DB left the target price unchanged at 295 pence describing the stock as “exceptionally cheap”.
Meanwhile Investec analyst Ian Gordon said he was “disappointed” after Diamond’s resignation after yesterday declaring the former boss “was not going anywhere”.
Investec reiterated its ‘buy’ recommendation and said Diamond’s departure will only help to return investors' focus to the fundamentals.
In the healthcare industry, GSK said it will pay a US$3 billion settlement for civil and criminal proceedings for mis-selling and marketing antidepressant and diabetes drugs.
The share price remains relatively unaffected today as the pharmaceutical giant said it has sufficient provisions to cover the full amount.
Analyst Dr Mike Mitchell said: “The finalisation of the terms of the settlement draws a line under this episode, which will be resolved within the existing pre-tax provision.”
Seymour Pierce maintained a ‘buy’ stance on the stock.
Society Generale upped its earnings forecast for Glaxo on the back of separate news about the successful phase III trials of its combination drug for ‘smokers cough’.
The broker said: “We view the data overall as positive, clinically relevant and likely highly competitive.”
Shire Pharmaceuticals (LON:SHP) also has to deal with litigation over its hyperactivity drug, Intuiv. Shire is trying to stop other companies making generic challengers.
However Citigroup believes the firm should settle before going to court.
Analyst Liav Abraham said: “A legal settlement will remove a key near-term overhang on the stock and reinforce its attractive 5-year sales and earnings growth profile (6 per cent and 9.5 per cent).”
The broker’s ‘buy’ recommendation is based on a Shire securing a settlement. It also gives a target price of 2250 pence per share.
Elsewhere broker Panmure Gordon downgraded its forecasts for supermarket Morrison (LON:MRW) over the next three years and reduced its target price down to 240 pence from 260 pence.
However analyst Philip Dorgan said: “This is not an ‘aggressive’ Sell, but we think that its period of share price underperformance will continue.”
He said risks to the stock include plans to diversify into small stores and new ‘upmarket’ formats for existing stores, the planned move to online and the departure of its finance director.
Credit Suisse said it was bearish on the digital recovery at betting firm Labrokes (LON:LAD), predicting it will need to increase its investment in side of the business.
However it upgraded its estimates by 10 per cent due to a better performance from machines.
Credit Suisse gives an ‘underperform’ valuation on the stock and target price of 142 pence.
