Cineworld Group PLC (LON:CINE) shares are just the ticket for HSBC, which has initiated coverage on the cinemas group.
HSBC’s price target implies the price could advance around 30% from the current level of 543.5p.
Analyst Ali Naqvi described the UK business as a ‘cash cow’ able to deliver £100mln of underlying earnings a year.
He also lauded the business’s defensive qualities, given its ability to continue almost untroubled in times of economic uncertainty.
Increasingly, long-term holders are looking for this type of investment as counter-weight to the more cyclicals stocks held in portfolios.
Credit Suisse is becoming increasingly concerned about fashion firm Next Plc’s (LON:NXT) ability to maintain its margins.
Operating expenditure is rising and, reflecting sterling’s post-Brexit vote plunge, input costs are on the rise, meaning Next will struggle to pass on higher costs.
On top of that, Next Brand sales are “looking increasingly mature”, and Credit Suisse (CS) reckons Next’s underlying earnings (EBIT) margins will have peaked at an industry high of 20% in 2015/16.
“Deteriorating sales growth for Directory (3Q 0%) implies that the only sources of sales growth for Directory are lower margin Label and International,” CS said, as it downgraded the stock to ‘under-perform’ from ‘neutral’.
The target price has been cut to 4,600p from 4,950p.
A bullish note from US heavyweight broker Citigroup sent Shire Plc (LON:SHP) to the top of the FTSE 100.
Brushing aside a mixed reaction to its third quarter results earlier in the week, the broker says relative to others in its sector Shire is compelling value.
The worries were sparked by a disappointing sales performance from new subsidiary Baxalta’s haematology drug portfolio, but any concerns here are now well in the price, said analyst Peter Verdult.
Suggestions that haematology revenues may drop by 10% from 2018 are wide of the mark, he reckons, given the volume growth, pipeline and potential safety issues for Roche’s new haemophilia rival ACE910.
Verdult says Shire offers potential earnings growth of 19% over the next five years on an earnings multiple of less than ten, while on a cash flow multiple basis the implied price is 7,000p, versus this morning’s price of 4,538p.
Morgan Stanley has upgraded defence firm BAE Systems PLC (LON:BA.) to ‘overweight’. Partly this is a response to an expected boost from overseas earnings, now that sterling is in the doghouse, but it also sees “upside risk from tank opportunities”, while concerns about Saudi Arabia and regulatory risks are overdone, in the US bank’s view.