Analysts at Canaccord Genuity lowered their rating on market research company System1 from ‘buy’ to ‘hold’ on Wednesday and cut their target price on the stock from 430.0p to 405.0p.
Canaccord said System1’s third-quarter trading update showed that data-driven revenues had continued to build during the period, with automated data products generating £2.8m in revenues to represent 43% of the quarterly total – up from the 36% reported with its interims in November.
However, while Canaccord acknowledged that data sales had continued to see “a fast take-up”, attrition in legacy consultancy revenues remained strong as customers switched to the data-driven model.
As a result, the Canadian bank reduced its full-year revenue estimates by 6% to £25.5m, while maintaining its expectation that data will contribute 44% of the annual total.
Shore Capital upgraded fund management services provider JTC on Wednesday to ‘buy’ from ‘hold’ following recent weakness, which it said does not reflect the business fundamentals evidenced by the in-line full-year trading update on 3 February.
It noted that after achieving a peak share price of 935.0p at the start of the year, JTC has lost around 20% year-to-date in a short space of time and is now less than 4% above the level just before the acquisition of US-based fund services provider SALI was announced in October.
“Given JTC’s high degree of revenue visibility and disciplined approach to M&A, earnings per share momentum has been relatively resilient and, after tweaking our forecasts, we think our assumptions remain prudent,” the broker said.
“Compared to a current 12-month forward price-to-earnings of circa 24x, our fair value of 900.0p (previously 925.0p) implies c29x, which we think is reasonable given JTC’s revenue quality, profitability (EBITDA margin 33-36%), growth (EPS 17% compound FY20A-23F) and strong cash conversion.”
Barclays downgraded Boohoo on Wednesday as it took a look at online fashion retailers, cutting the stock to ‘underweight’ from ‘equalweight’ and slashing its price target to 85.0p from 135.0p.
Barclays said that after many years of strong top-line growth, fashion e-commerce retailers were coming out of the pandemic with the challenge of sustaining elevated growth and stabilising margins. On top of that, they also face “a laundry list” of headwinds, including global supply chain pressure, macro conditions, competition, ESG, and company-specific issues.
“FY22 earnings forecasts have come down in recent quarters, but calling the earnings inflection is tricky. Investors need to gauge the timing of the inflection and the medium-term trajectory,” Barclays said. “Visibility remains low, making it nearly impossible for investors to get comfortable on either.”
Barclays added that on the balance of risks, it has “relatively higher confidence” in Zalando meeting both short-term numbers and medium-term targets.
“We see incremental risks at Boohoo and think things could get worse before they get better,” Barclays said. “We do not think it is fundamentally broken but expect growth to come at a higher cost than medium-term guidance implies.”
Analysts at Berenberg slightly raised their target price on real estate investment trust Residential Secure Income from 100.0p to 110.0p on Wednesday, stating it was “optimistic” on the group’s shared ownership pipeline.
Last week, Residential Secure Income finalised its £15.0m capital raise to part-fund £39.0m-worth of shared ownership assets, encompassing 272 completed homes in southern England.
Berenberg noted that the majority of units will be income-generating on acquisition, reflecting an average net initial yield of 3.5% – accretive to the company’s current shared ownership portfolio yield of 3.0%.
“We view this, as well as the company’s resumption of acquisition activities more generally, including the outlined pipeline of £145.0m in shared ownership acquisitions, as positive,” said the German bank.
However, while Berenberg thinks scope for shared ownership acquisitions remains to grow earnings per share and EPRA net tangible assets per share, it noted the firm has been slow to deploy capital in recent times.
