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Broker tips: ITV, Sports Direct, Ocado

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Broker tips: ITV, Sports Direct, Ocado

Wed, 15 February 2012
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Broker tips: ITV, Sports Direct, Ocado

With shares in broadcaster ITV having gained steadily since mid-December, Peel Hunt thinks they are now up with events and downgrades the stock from buy to hold ahead of the company's full-year results at the end of the month.

"With much of the upswing in 2012 TV revenues now factored into our numbers for the year, given a boost by the Euro 2012 tournament in the summer, we believe the upside now looks limited in the absence of upgrades," said analyst Patrick Pau.

Nevertheless, Peel Hunt says its remains positive about the company's underlying trading and its progress in its 'Transformation Plan'. The broker leaves its target price at 183p.

Panmure Gordon has reiterated its buy call for Sports Direct, saying that the sportswear retailer's third quarter statement was "exceptional" and has prompted upgrades to profit forecasts.

"We believe that its online opportunity is still under-appreciated in a FY2013 price-to-earnings [multiple] of just 10. Online sales have the potential to grow to over 20% of total revenue by FY2015 and we think that Sports Direct will be one of the winners in an increasingly crowded multichannel world," said analyst Philip Dorgan.

With the group now "certain" of reaching its earnings targets for the full-year, Panmure has raised its pre-tax profit forecasts for the current year by 8% to £171m and by 12 to £218m for next year. "The latter number looks eminently achievable, given the likely positive impact of Euro 2012," Dorgan said.

The broker leaves its 300p target price in place.

UBS has downgraded its rating for grocery delivery firm Ocado from buy to neutral due to the stock's recent outperformance.

The broker says that Ocado shares have been highly volatile ever since the company's initial public offering (IPO) in 2010, "a feature which may be partially explained by the large short position (c20% stock on loan)." With the stock having jumped over 90% in 2012 so far, UBS says that the upside to its target price has been removed, hence the downgrade. Nevertheless, the target price has been raised from 95p to 110p, due to high peer group multiplies.

Despite the rating cut, UBS still thinks that the firm's full-year results have provided some causes for optimism. "Ocado’s results and Christmas trading statement have undoubtedly eased some concerns. Although sales growth in Q1 FY12 will remain relatively subdued by ongoing capacity constraints, it seems likely that these will reduce over forthcoming quarters which should ease any fears that the business is experiencing a meaningful moderation in demand."

BC

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