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Broker tips: Team17, NatWest, XP Power

By Iain Gilbert

Date: Thursday 05 Aug 2021

Broker tips: Team17, NatWest, XP Power

(Sharecast News) - Analysts at Canaccord Genuity lowered their rating on video games developer Team17 from 'buy' to 'hold' on Thursday, stating the group's share price was now approaching its target.
Canaccord said Team17's interim trading update earlier in the week stated that the group had traded in line with management's expectations during the first half of 2021 and entered the second in "great shape".

As a result, Canaccord made no changes to its full-year estimates for adjusted underlying earnings and earnings per share, which were around 5-7% ahead of consensus, and added that it does not expect consensus to change either, at this stage.

The Canadian bank, which reiterated its 850.0p target price on the stock also noted that its estimates appeared to be roughly 12% higher than consensus, but it pointed out that the consensus "was quoted mostly after amortisation of acquired intangibles".

Goldman Sachs has taken NatWest off its 'conviction buy' list, citing headwinds in UK mortgage pricing.

In a broader note on UK banks, GS said that since being added to the conviction list last March, NatWest shares are up 11% versus the FTSE World Europe up 9%.

"As we now expect bigger headwinds from mortgage pricing, we reduce our 12-month return on equity/cost of equity based price target by 5% to 305.0p (from 320.0p) and remove the stock from our conviction list," it said.

Goldman said that while its 2021 and 2022 earnings per share estimates increase by 2-18% due to lower cost and LLP forecasts following the second-quarter results, its 2023-25 EPS estimates reduce by 7-9%, primarily due to mortgage price declines.

"We still see the share offering upside of circa 50% and remain buy-rated on the stock, given its exposure to higher rates, scope for above market growth, attractive capital return prospects, ongoing restructuring and attractive valuation," GS said.

Analysts at Berenberg hiked their target price on power supply manufacturer XP Power from 5,945.0p to 6,050.0p on Thursday following the group's "very strong" interim results earlier in the week.

Berenberg highlighted that XP Power's first-half results revealed that orders were up 17% year-on-year on a constant currency basis, despite "an exceptionally tough" comparative, and that revenues were 23% higher year-on-year.

The German bank noted there was "continued strong demand" in semifab and industrial technology, more than offsetting the anticipated reversal of Covid-19-related healthcare orders.

Despite the "continued strong demand", Berenberg believes nervousness from some investors relating to the semiconductor cycle had caused shares to underperform the sector year-to-date.

"We feel this is unwarranted and overlooks the near-term momentum, improved cyclical resilience and long-term secular growth exposures," said the analysts, who reiterated their 'buy' rating on the stock and reinstated XPP as a "top pick" in the UK industrials sector.

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