Broker tips: Spectris, Inchcape, AutoTrader, JD Sports, Angle
By Iain Gilbert
Date: Thursday 23 Jan 2025
(Sharecast News) - Shore Capital has reiterated its 'buy' rating for Spectris after an encouraging update from the precision instruments group on Thursday, saying it sees the potential for a material ratings upgrade.
As of Wednesday's close, the stock was trading at a "near trough equity rating", despite significant scope for recovery and long-term growth, the broker said.
"This follows a series of downgrades, most recently on 31 October, so we expect that investors will be encouraged by this update," Shore Capital said.
Looking ahead, the broker said it sees "strong potential from recent acquisitions", which gives it increased confidence in the group's medium-term targets, such as an adjusted operating margin of 20%+ and organic growth of 6-7%.
"If these are achieved, we believe the shares would trade on a considerably higher rating, closer to peers, such as Halma, Oxford Instruments, Renishaw and Judges Scientific, which have FY25F EV/EBITDA multiples ranging from 12.8x to 23.0x. Many US-listed peers have even higher equity ratings."
Inchcape tumbled on Thursday as JPMorgan Cazenove downgrades shares of the car dealership to 'neutral' from 'overweight' and slashed the price target to 800p from 1,050p.
The bank also placed the shares on "negative catalyst watch" and said investors should "prepare for increased volatility ahead".
Citi upgraded Auto Trader to 'buy' from 'neutral' on Thursday and lifted the price target to 946p from 881p as it said it was in "pole position to outperform".
"We consider the outlook for Online Classifieds in 2025 and expect more challenged macro trends to support outperformance in autos classifieds," the bank said.
Citi said its 'buy' rating on Auto Trader is driven by the fact the company is well-positioned to benefit from the current macro environment, as car shortages continue to drive demand, supporting car prices and used car dealers.
In addition, the bank sees potential upside from Auto Trader's expansion of Deal Builder and work to expand its product offering.
Finally, it said competition remains a "peripheral factor" relative to the property classifieds.
Citi also downgraded its stance on JD Sports on Thursday to 'neutral' from 'buy' and cut its price target to 95p from 150p as it pointed to a weaker growth outlook.
The bank said it was updating estimates following soft peak trading and the company's full-year guidance downgrade.
Citi cut its forecast for FY25 like-for-like and organic growth to 0.0% and 5%, respectively, from 1.1% and 6.4% growth, previously.
The forecasts for FY26 were cut to -2.7% and +1.3%, from +1.6% and +6.9%, respectively. Citi said this reflects weak consumer sentiment and a promotional environment that JD has chosen to limit participation in, particularly in North America and the UK.
"Our reduced sales forecasts lead to FY25e EBIT margin -30 basis points versus previous estimates," it said. "We reflect the Courir acquisition, and JD's new guidance of an additional acquisition accounting-related cost for Hibbett of £6m in FY25e."
Citi cut its FY25 pre-tax profit estimate by 5% to £920m, versus consensus of £955m and guidance of £915m to £935m, while the FY26 estimate for pre-tax profit was cut 18% to £930m.
Analysts at Berenberg slashed their target price on liquid biopsy specialist Angle from 70.0p to 40.0p on Thursday but said the group was "repositioned for growth" in FY25.
Angle released a FY24 trading update on Tuesday morning, in which it said it now expects to deliver revenues of £2.9m - just below the lower end of its H1 guidance range - with its loss for the year expected to be in line with guidance.
Given the decline in revenues reported in H1, Berenberg said it was "encouraging" to see a return to growth in H2 and that management appears positive on the trajectory for FY25.
"Looking ahead, we expect further progress and expansion of the company's existing large pharma partnerships in 2025E and 2026E, with the possibility of further partnership deals to accelerate growth in the medium term," said the German bank, which has a 'buy' rating on the stock.
"For 2026E, Angle trades on 5x EV/sales. Our 40p price target is based on a risk-adjusted NPV (rNPV) approach. The reduction to our price target is largely the result of lower estimates."
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