Broker tips: AJ Bell, Pets At Home
By Iain Gilbert
Date: Tuesday 01 Apr 2025
(Sharecast News) - Deutsche Bank upgraded AJ Bell on Tuesday to 'buy' from 'hold' but cut the price target to 480p from 500p.
The bank downgraded the shares to 'hold' on 6 December 2024 mainly on valuation grounds.
At the time, it believed the risk/reward balance was about fair. Since then, the shares have fallen around 17% with no fundamental changes to the business in DB's view, hence the upgrade.
"The regulatory situation in relation to interest margin on client cash remains unresolved, and indeed on 09/12/24 the FCA reiterated that this remains on the list of priorities for 2025," Deutsche said.
"Whilst this remains unresolved, it remains a meaningful risk to the group, given we estimate this represents circa 44% of FY25E revenue and the contribution is broadly equivalent to the entire FY25E EBIT."
However, DB also noted that the UK government has recently been putting considerable pressure on UK regulators to prioritise growth and de-regulate where possible.
Analysts at Berenberg lowered their target price on retailer Pets At Home from 290.0p to 245.0p on Tuesday, stating that it was awaiting positive catalysts.
Berenberg said Pets at Home's FY25 pre-close update on 31 March reaffirmed the "tough outlook" for its retail division. It also noted that while FY25 underlying pre-tax profit guidance of £133.0m, was reiterated, management now expects FY26 PBT to be below consensus at £115.0m-125.0m, principally due to ongoing subdued demand and cost pressures.
The German bank reduced its FY26 group pre-tax profit forecasts by roughly 15% to £121.0m, with the guidance mid-point representing an approximately 10% decline year-on-year, which it also reckons will flow through to FY27.
"The shares are not expensive, and strong cash generation, a healthy dividend yield and potential ongoing share buybacks may provide support. However, bid speculation aside, near-term catalysts appear to be in short supply," said Berenberg, which reiterated its 'hold' rating on the stock.
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