Broker tips: SThree, M&S, Hollywood Bowl
By Iain Gilbert
Date: Tuesday 17 Dec 2024
(Sharecast News) - Jefferies cut its target price on SThree on Tuesday after the group's warning highlighted further downside to earnings for UK staffers.
Jefferies lowered its price target on SThree from 420.0p to 300.0p after the group's unplanned trading update last week called out ongoing challenging market conditions, with increased political and macro-economic uncertainty in Europe driving further customer delaying decision-making which was now expected to negatively impact FY25 performance.
"With SThree more contract exposed vs UK peer the prolonged downgrade cycle seen across the market seems to be catching up with SThree," said Jefferies, which kept its 'hold' rating on the shares.
"We update our sector estimates and further moderate our recovery expectations. We downgrade SThree FY24-25e EPS by up to 63%, in line with updated guidance, with our lowered 300p target price reflecting both lower net fees and a lower 1x EV/net fee multiple."
Kepler Cheuvreux initiated coverage of Marks & Spencer on Tuesday with 'buy' rating and 467.0p price target.
"M&S's share price has rallied spectacularly over the past two years," it said. However, the valuation multiples have risen little relative to its peers, Kepler said.
"Benefiting from high-quality management, we believe that M&S should continue to offer positive momentum in its two businesses, enabling the steady growth that sets it apart in the UK retail sector."
Analysts at Berenberg slightly raised their target price on bowling centres operator Hollywood Bowl from 420.0p to 440.0p on Tuesday following the group's "solid" FY24 earnings and "upbeat" FY25 guidance.
Berenberg said Hollywood Bowl remains a top pick in the leisure space after it reported a record full-year performance, with strong growth despite tough comparatives and cost headwinds.
The German bank increased its revenue and underlying earnings estimates but also hiked its below-the-line items due to higher capex investment driving higher depreciation. This left EBIT broadly unchanged.
"Hollywood Bowl remains positive about its prospects in FY25, with trading performance starting well in the year and the company on track to meet its target of 130 centres by 2035. We expect positive like-for-like growth in FY25 and the impact from National Insurance changes to be partly mitigated," added Berenberg.
Looking ahead, Berenberg remains confident in Hollywood Bowl's prospects given its "best-in-class management team, solid balance sheet and long runway for growth". The analysts also npoted that Hollywood Bowl now trades on a price-to-earnings ratio of 14.6x and 14.1x on FY25/FY26 estimates.
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