RBC Capital Markets has downgraded 3i Group PLC (LSE:III) to 'sector perform" from 'outperform' on valuation grounds.
Noting that its shares have climbed over 140% in the past three years, RBC considers the current premium on 3i’s stock to limit potential gains, despite strong recent returns from the group’s key asset, Dutch discount retailer Action.
While Action has been a major growth driver, RBC predicts its expansion could slow as consumer spending shifts away from discount shopping in 2025.
RBC also expects a recovery in private equity activity next year, which it believes could favour firms investing third-party capital rather than 3i, which invests its own funds.
Its target of 3,425 pence, still provides some modest upside from the current share price of 3,200p (flat on the day).