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Broker round-up: M&S, Home Retail, BT, Blur and New River Retail

Last updated: 13:50 08 Oct 2013 BST, First published: 12:50 08 Oct 2013 BST

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It's hard to recall the last time Marks and Spencer (LON:MKS) was called the compelling story in UK retail, but SocGen believes it’s time for a full-blown renaissance for the high street bellwether.

The broker expects to see better like-for-like sales trends in the November trading update, but adds this might just be the start.

“We see M&S regaining its former status as an industry innovator, now pushing ahead online and multichannel.

“Ultimately, we think it is capable of joining a select group of ‘retail defensives’ with a permanent share buy-back strategy in years to come.”

It’s punchy stuff and backed up with an equally punchy rise in share price target from 499p to 636p, a level the retailer hasn’t seen for over half a decade. Unsurprisingly, the rating for M&S shares is ‘buy’.

The tone is a world away from yesterday's downgrade from Credit Suisse and a mixed review from Deutsche Bank today.

Credit Suisse believes that M&S's second half has been slower than expected, while the new ranges, however well-received, won't be sufficient to boost sales or margins. Deutsche also doubts the new ranges will be sufficent to convince the market a turnround is underway.

SocGen is less bullish on prospects for Home Retail (LON;HOME). Downgrading the Argos and Homebase owner to ‘sell’ from ‘hold’, it suggests that despite a better consumer outlook, the near 90% rise in the shares this year is plenty for now.

Even so, the broker still sees a lot of good news in the short-term, especially if this year’s Christmas season proves better than expected and which explains the rise in the target price to 155p from 128p.

Staying with a retail theme, albeit from a different angle, New River Retail’s (LON:NRR) key attraction is its 6.6% dividend yield, according to City broker Liberum Capital, which today began its coverage with a ‘buy’ recommendation.

Reflecting the fact that it sees New River as an income play, Liberum has a target price of 256p, which is about 6% above the current price of 241.5p.

The broker highlights that the specialist retail real estate investment trust’s (REIT) strategy is to acquire high yielding retail assets with sustainable income profiles.

Elsewhere, an opportunity for growth remains in the UK telecoms sector, says heavyweight broker Goldman Sachs, particularly with TV offerings set to change the dynamics.

It has repeated its buy stance on BT (LON:BT.A), Liberty Global and BSkyB (LON:BSY) - the latter two being placed on its conviction 'buy' list.

"For BT, we expect a large re-rating" as cost cutting, fibre and the use of TV to reduce line-loss drives 3-year underlying compound earnings growth of 3%. 

Talk Talk (LON:TALK), which it also rates as 'buy', is set to have growth stimulated from the launch of its low-cost/ price essentials TV product last week.

There were lots of impressive metrics in the latest update from blur (LON:BLUR), but equally illuminating is the number of brokers now covering the company.

Panmure Gordon is the latest City firm to add the crowd-sourcing specialist to its coverage universe, kicking off with a ‘buy’ recommendation and a 677p price target.

The company is an undoubted stock market star and Panmure Gordon’s George O’Connor even suggests founder and chief executive Philip Letts has “rock star qualities”, but the broker has tried to ignore all the hoop-la, and look under the hood at what makes blur tick.

Liberum Capital, for whom a ‘buy’ recommendation is not enough – the rating is ‘strong buy’ - said the update reveals very strong momentum in all areas of the business.

“While the number of projects submitted and completed are running ahead of expectations, the major upside in the quarter came from average project value submitted which rose sharply to $28.8K in the quarter.


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