Broker tips: Nexteq, Lloyds
By Iain Gilbert
Date: Thursday 31 Oct 2024
(Sharecast News) - Analysts at Canaccord Genuity lowered their target price on business-to-business technology firm Nexteq from 200.0p to 110.0p on Friday, citing short-term headwinds.
Canaccord Genuity said H1 trends had persisted into H2, with Thursday's unplanned trading update confirming a continuation of the trends seen in H1, with customer de-stocking and delayed product rollouts creating a weaker trading environment.
Nexteq now expects FY24 revenues to be "10-12% below" previous expectations, in part offset by continued margin strength and careful cash control, resulting in adjusted pre-tax profits of "no less than $6.0m".
"On our revised estimates, Nexteq trades on a 2025E ex-cashP/E of 12.0x, an EV/EBITDA of 6.3x and a dividend yield of 3.7%. In our view, Nexteq offers a strong balance sheet providing capital allocation optionality, and a stable, cash-generative platform well-placed to recover as the market turns. As such, we maintain our BUY rating but lower our price target to 110p (from 200p) on our revised estimates, based on 10-year average P/E (16x) and EV/EBITDA (10x) multiples," added the Canadian Bank.
RBC Capital Markets has cut its target price on Lloyds after this week's landmark ruling on motor finance commissions, saying that the news brought about an increased level of uncertainty and potential downside for lenders.
Last Friday, the Court of Appeal ruled that it was unlawful for motor dealers to receive commission from lenders when providing finance unless it was disclosed to the customer, who needs to give their consent. Banks will now be liable to return the commissions to the customer because there was an agency arrangement in place.
RBC said there will likely be a delay in the FCA announcing its findings until next summer, extending a period of uncertainty for UK banks about the potential impact that could be incurred.
For Lloyds, RBC estimates a £3.2bn impact, up from an earlier estimate of £2.5bn, and believes the bank will reduce its 2024 buyback programme to just £1.0bn, compared with an earlier estimate of £2.0bn.
The broker cut its target price for Lloyds shares to 56.0p from 60.0p, keeping a 'sector perform' rating on the stock.
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