Rentokil Initial PLC (LSE:RTO) continues to slip following last week’s profit warning, but two brokers believe that at these levels the shares have fallen far enough.
Barclays is a fan, reiterating a 'buy' rating and 700p price target, stating that its long-term view hasn’t changed.
“Whilst disappointing the North American business has slowed, there is not sufficient evidence to affect our view of the quality of the combined business that will emerge post-integration,” the bank said.
“For those who 'missed out' on Rentokil's earlier share price gains, this is now an opportunity to buy the shares,” it suggested.
It thinks the share price reaction is excessive, noting shares are essentially back to where they were pre-pandemic.
“Even if North American organic growth remains below trend in FY24e, perhaps due to ongoing integrations and/or continued constrained consumer budgets, the downside risk to earnings in the business is small vs. the magnitude of the share price reaction,” Barclays said.
Jefferies agrees. “Some time may be needed to rebuild confidence, but the implied c15% de-rating in the shares feels overdone and may offer a potential opportunity for investors willing to be patient,” it said.
The broker trimmed estimates by 2-6% and set a new 650p target price, down from 740p.
Shares are down 1.6% at 457p.