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Broker tips: IWG, Dr Martens, Aston Martin

Analysts at Berenberg cut their rating on serviced offices provider IWG from ‘buy’ to ‘hold’ on Thursday, stating they were “pausing for breath” as recovery waits.
Berenberg stated that after “an incredibly challenging year” for IWG, it believes the company has come out of 2020 in “a strong position”, highlighting that the business was lowly levered, had remained cash-generative throughout the Covid-19 pandemic, had seen the benefits of its national and global model with large corporate enterprise deals and had made “clear steps” on the path to a capital-light growth model.

Given this, the German bank thinks IWG has a “clearer competitive advantage” in a post-Covid-19, flexible-working world, in a market that looks well set to take share over the long run.

However, Berenberg said a second downgrade to its forecasts in three months highlighted the risks to earnings as IWG emerges from the pandemic, with occupancy likely to need time to recover from a lower base as global lockdowns have lasted longer than initially expected.

“In turn, this then makes the near-term outlook for material master-franchising deals weaker, limiting potential positive catalysts,” said the analysts, who also lowered their target price on the stock from 425.0p to 370.0p.

Barclays and Royal Bank of Canada were both positive about Dr Martens as they started coverage but Barclays was more cautious about the boot maker’s valuation.

The bank gave Dr Martens an ‘equal weight’ rating and a price target of 480.0p, stating the company’s revenue and earnings prospects over the next three years justified a premium valuation but also noted that shares had gained 27% since January’s IPO.

Barclays stayed that when benchmarked against peers such as Canada Goose, Crocs and Deckers, Dr Martens’ fair value was between 267.0p and 543.0p and noted that with the shares at 456.0p at the time of publication, that valuation looked “on the high side”.

RBC also initiated its coverage of Dr Martens with an ‘outperform’ rating and a 550.0p price target, stating the group has opportunities to increase revenue in Asia Pacific, Europe, Middle East and Africa and the Americas, RBC said.

“DM has meaningful revenue growth prospects in the attractive branded footwear segment, and modest margin opportunity,” RBC said. “We believe its strategic plan is tried and tested, underpinned by an established management team and strong brand momentum.”

Analysts at Citi reiterated their ‘buy’ recommendation for shares of Aston Martin pointing to signs of strong pricing for its sports cars.

Citi said proprietary data from Aston Martin showed that the “unexpected” strength in demand for sports and GT models seen at the end of 2020 had extended into 2021.

The bank also added that the first indications for used vehicle pricing of its DBX models in the US were “particularly strong”, something it labelled a “positive” and an integral component of its buy-case on the stock.

Citi also slapped a 2,800.0p target price on Aston Martin’s shares.

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