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Broker tips: Boohoo, Bakkavor, THG

By Iain Gilbert

Date: Tuesday 25 Jan 2022

Broker tips: Boohoo, Bakkavor, THG

(Sharecast News) - RBC Capital Markets downgraded fast-fashion retailer Boohoo to 'sector perform' from 'outperform' on Tuesday, slashing the price target to 150.0p from 330.0p.
The bank said it lacks confidence in the company's top-line recovery, especially while its international proposition remains uncompetitive.

"We believe offering a competitive customer proposition is necessary in order to at least maintain market share," RBC said.

"As such, we view boohoo as vulnerable to further market share loss."

The bank said its price target was cut as it lowered its adjusted EBITDA estimates by around 40% "following the recent soft trading performance and outlook".

Analysts at Berenberg reiterated their 'hold' rating on food manufacturer Bakkavor on Tuesday, stating they were still playing a "waiting game" when it came to the stock.

Berenberg said Bakkavor's recent full-year 2021 trading update did little to change its thinking when it came to the firm.

The German bank said although 2022 will be "a challenging year" for Bakkavor, as it looks to manage ongoing cost inflation and labour shortages, this pessimism had been somewhat tempered by the company's "strong sales momentum" in the US - a market that it feels has "attractive" medium-term prospects.

"Nonetheless, despite Bakkavor trading on an undemanding 10x FY23E earnings multiple and an 6% dividend yield, we think that the near-term risk/reward is balanced and we maintain our 'hold' rating," said Berenberg, which also stood by its 145.0p target price on the stock.

Berenberg added that if Bakkavor continues to maintain momentum in the US and China, while de-levering to allow further capacity investment, patient investors should be rewarded.

RBC Capital Markets upgraded THG on Tuesday, arguing that it saw "fundamental value" in the shares.

In a note published on Tuesday, RBC stated that despite the controversy around THG, it sees "fundamental value in the shares".

"With the shares down a further 60% in the last three months, top line earnings expectations reset and catalysts ahead, we see risks skewed to the upside from here," said RBC.

RBC upped its rating to 'outperform' from 'sector perform'. It left its price target unchanged at 500.0p.

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