Broker Spotlight – QinetiQ, BT, Telit , Stanley Gibbons ...

The recent rally in Qinetiq shares has gone too far

UBS has goosed QinetiQ with a ‘sell’ recommendation

Shares in QinetiQ (LON:QQ.) fell more than 2% on Friday morning after UBS downgraded the Hampshire based defence engineer to ‘sell’.

QQ’s rally, up to around 235p from 180p in April, has gone too far according to the Swiss bank, which believes margin pressure will likely stunt profit growth.

“We estimate that the current share price is pricing in no margin decline,” says UBS, which sees QQ’s ‘fair value’ at 205p.

On the other hand, however, there are reasons for investors in sector peer Meggit (LON:MGGT) to be cheerful, as UBS has taken it off the ‘sell’ list and now has a ‘neutral’ rating.

“The recent share price decline allows us to use base case margin assumptions and see the stock as broadly fair value,” the bank said of Meggit.

Liberum Capital removes its ‘sell’ recommendation from GlaxoSmithKline (LON:GSK) and the drug-maker is now seen as ‘hold’.

Microchip maker Arm Holdings (LON:ARM) is expected to fall behind its peers, according to Bernstein, which cuts the stock to ‘underperform’. With a new price target set at 800p, Bernstein sees nearly 30% downside to Arm’s current price of 1,100p.

Deutsche Bank and Jefferies both nudged higher their target for Debenhams (LON:DEB).

Debenhams’s strategy appears “solidly on-track” said Jefferies, which lifted its price target to 105p from 85p and repeated a ‘buy’ recommendation.

Similarly Deutsche, which has a ‘hold’ rating, reckons the retailer is moving in the right direction; its price target increases to 87p from 77p.

The German bank, elsewhere, questioned whether the renewed optimism towards Petrofac (LON:PFC) was warranted.

Analyst Sebastian Yoshida said he was sceptical about the drivers behind the recent 15% rally in the oil services group’s shares.

Nike’s latest trading statement is good news from a JD Sports’ (LON:JD. perspective, said Peel Hunt. 

JD has a fascia that has been winning footwear market share since 2011 and will continue to do so.

This underpins the broker’s top of the range forecasts. On 14 times earnings, the shares are a clear ‘buy’ says Peel Hunt.

Credit Suisse expects BT’s (LON:BT.A) acquisition EE to be approved with relatively minor remedies and not to include a spin-off of network arm Openreach.

Earnings estimates have been tweaked higher due to price increases for BT Sport, putting the telecoms group on an attractive valuation said the broker.

Outperform is its rating with a price target.

Telit (LON:TCM) is a global leader in the Internet of Things (IoT) and machine-to-machine (M2M) connectivity market.

Having met chief executive Oozi Cats, he particularly optimistic about the company’s automotive and cloud businesses, alongside its emerging strength in Asia-Pacific.

Revenues are expected to grow by 20% compound over each of the next three years and a sUBStantial discount to M2M module manufacturers is still unjustified. Buy with a price target of 410p says Berenberg.

Stanley Gibbons’ (LON:SGI) full year results met expectations, said Peel Hunt.

The company is already seeing good growth in its online presence, however the launch of Marketplace will demonstrate whether the company can become a major player in collectibles online. Early signs are encouraging. 'Buy' with a 330p price target.

Quick facts: QinetiQ

Price: 288 GBX

Market: LSE
Market Cap: £1.64 billion

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