Broker tips: CMC Markets, EasyJet, SThree
By Iain Gilbert
Date: Tuesday 26 Oct 2021
(Sharecast News) - Analysts at RBC Capital Markets lowered their target price on financial services firm CMC Markets from 560.0p to 410.0p on Monday after the group's "more cautious" net operating income guidance for FY22.
RBC said its updated forecast for full-year net operating income of £265.0m sits in the middle of the CMC's guided range of £250.0m-280.0m.
Within its model, the key driver of the reduced net operating income was lower revenue per client, however, the analysts also reduce client income retention and active clients.
The Canadian bank, which stood by its 'outperform' rating on the stock, added that it had reduced its operating expense assumptions, but said it was continuing to look for growth in operating costs year-on-year, in line with company guidance.
"The net impact of these changes is a 42% reduction in PBT, EPS and DPS for FY22 (as we maintain a 50% dividend payout). As we now look for growth from a lower base in FY23, we reduce EPS and DPS by 28% for that year," said RBC.
Analysts at Berenberg cut their target price on low-cost carrier EasyJet from 930.0p to 720.0p on Monday after the group's larger than expected equity raise.
EasyJet announced a £1.23bn rights issue on Thursday, roughly £500.0m larger than initially anticipated by the market and the cause of a roughly 40% dilution.
However, the German bank did acknowledge that the larger amount removed "a key overhang" for the company and that it now expects the new equity to lower leverage to 0.9x for 2023 - 1x lower than its prior view.
Berenberg, which reiterated its 'hold' rating on the stock, also noted that EasyJet's management indicated that they remained open to merger and acquisition talks despite declining a recent takeover offer, widely reported to be from Wizz Air, because the bid was "highly conditional" and "significantly undervalued" the firm.
Liberum has upped both its forecasts and price target for SThree after the specialist recruiter posted a strong set of third-quarter numbers.
In a note published on Monday, the broker said third-quarter net fee income momentum had "accelerated well beyond expectations".
Liberum said: "The contractor order book is strong - +41% - and SThree looks set to be the first in our coverage universe to breach pre-Covid peak pre-tax profit levels."
Earlier on Monday, SThree announced that full-year profits were likely to be "significantly above" market consensus following a 29% year-on-year hike in group net fees.
As a result, Liberum upped its 2021 pre-tax profit estimates by 20% to £60.0m, with the risk to forecasts remaining on the upside.
It also increased its 2022 full-year pre-tax profit forecasts, by 19.0%, though the bank noted: "The year-on-year growth in pre-tax profit is very cautiously set, reflecting the likelihood of further investment in the business to support future growth."
Liberum, which has a 'buy' rating on the stock, hiked its target price for SThree from 650.0p from 580.0p.
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