Broker tips: Pennon, Admiral, Team Internet
By Iain Gilbert
Date: Monday 10 Mar 2025
(Sharecast News) - Analysts at Citi upgraded shares of Pennon on Monday, telling clients that markets had become unduly pessimistic.
In their judgement, Pennon shares had been left discounting an operational underperformance of more than £500.0m or a quarter of its market value.
The resulting valuation gap meant that the stock's risk/reward profile on offer was skewed to the upside, leaving scope for a mean reversion trade.
"With the company balance sheet now fixed post right issue, we upgrade to Buy and open a 30-day positive catalyst watch ahead of the upcoming CMD on 13th March," said Citi.
RBC Capital Markets has hiked its target price for Admiral following the insurer's 2024 results released last week, saying the company showed "no signs of slowing down".
The broker kept an 'outperform' rating on the stock but lifted its target price from 3,550.0p to 3,800.0p.
RBC said it was raising its 2025 and 2026 earnings forecasts by 8% and 6%, respectively, on the back of the results, due to better combined ratios and higher profit commissions in the UK Motor segment.
"A record year of UK Motor growth at strong margins in FY24 should sustain earnings momentum into outer years as premiums are earned through while reserve releases and profit commissions provide further support," RBC said.
With the stock trading at 15 times earnings with a dividend yield of 6%, the valuation still remains "attractive", the broker said.
Analysts at Berenberg reinstated coverage on internet services business Team Internet at 'buy' on Monday, albeit at a reduced target price.
Berenberg stated that it had opted to reinstate coverage on Team Internet after fund manager Verdane's announcement that it did not intend to make a firm offer for the business. This followed TowerBrook's confirmation on 10 January that it also did not intend to make a firm offer.
In conjunction with this announcement, Team Internet provided an update following Google's change to AdSense for Domains, with management now forecasting that FY25 adjusted underlying earnings will be in the range of $60.0m-68.0m, versus prior consensus estimates of $98.0m.
"We reduce our FY25E adjusted EBITDA estimate to $60m, which represents a 39% decline versus our previous estimate. In addition, we reduce our price target to 100p. Shares are trading on 6x FY25E P/E on our revised forecasts," said the German bank, which previously had a 170.0p target price on the stock.
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