Shore Capital has downgraded TP ICAP PLC (LSE:TCAP) from buy to hold following a 75% appreciation of the financial services firm’s share value from its 2022 low.
After plateauing close to one pound in July, London-listed TCAP shares have since rebounded to 175p, leaving little headroom for further growth.
In Shore Cap's worlds, TCAP shares have "travelled and arrived".
TP ICAP “is now close to our fair, which we maintain at 180p, predicated on a 12-month forward price-to-earnings ratio of 7.5x,” said research analyst Vivek Raja.
Shore cap noted an attractive yield of 6.8% for the 2023 financial year, but also noted that “for the rerating to sustain, we think either earnings momentum needs to improve meaningfully or value is to be unlocked through reorganisation of the business”.
While Raja agreed that current-year trading is showing cyclical recovery led by rates, other parts of the business have “disappointed”.
“Furthermore, management needs to prove its significant investment in Liquidnet and the associated strategic pivot to direct-to-customer flows,” said Raja.