Broker tips: Future, NatWest
By Iain Gilbert
Date: Thursday 30 Nov 2023
(Sharecast News) - Canaccord Genuity has cut its recommendation for Future from 'hold' to 'sell' ahead of the specialist media group's annual results next week, saying it sees downside risk to market forecasts.
"Future has seen its shares rally over 40% from the lows in June 2023. As we head into the full-year results, due 7 December 2023, and look ahead to FY24, we believe there is material risk of downgrades to Refinitiv consensus," said analyst Karl Burns.
Burns cited a weak advertising demand backdrop as reported by others in the sector like Trade Desk, S4Capital, Reach and others.
"We believe consensus is overly optimistic, expecting group revenue growth (+1%) and flat EBITDA margins despite a deteriorating macro environment and structural pressure on the business. Peer updates have been weak, while global advertisers and retailers have reported weakness in consumer electronics, Future's largest revenue category (33% of sales)."
The broker's forecasts for the current year ending September 2024 are already 15% below consensus forecasts in terms of pre-tax profit, yet it still sees downside risk to its estimates. Due to the uncertain outlook, the broker has cut its target price for the stock from 827.0p to 758p.0.
JPMorgan Cazenove upgraded NatWest on Thursday to 'overweight' from 'neutral' and lifted the price target to 280.0p from 230.0p as it took a look at European banks.
JPM said it remains bottom-up in its approach to European banks, and further shifts the portfolio away from short-rates driven net interest income (NII) geared banks as it believes we are at, or near, peak rates in key geographies.
The bank's house view is for no further hikes by the European Central Bank, Bank of England or Federal Reserve, but rate cuts starting with the Fed and ECB in H2 2024.
"Hence, we shift away from currently low deposit beta driven NII-geared banks and instead increase the quality bias of our portfolio by adding BBVA to current top picks UBS, ING and ISP," it said.
JPM also added NatWest to its 'top picks' portfolio, as it sees the stock materially undervalued at 4.8x price-to-earnings 2025E.
"While 4Q net interest margin could still be under pressure, we see this as largely discounted and in 2024/25 we are in line with consensus on NII," it said.
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