Broker tips: YouGov, Yellow Cake

Berenberg has slashed its target price for research firm YouGov by 18% but still sees significant upside after recent weakness in the shares.

YouGov's stock surged 19% to 824p on Tuesday after its full-year results, which showed a strong performance in spite of a difficult macro environment. As of Monday's close, the stock had fallen by around 32% since the start of 2023.

YouGov said revenues were up 17% in the 12 months to July 2023, up 9% on an underlying basis, with adjusted EBIT up 33%, with broad growth across all geographies. Meanwhile, the acquisition of GfK's consumer panel business remains on track and should close soon.

Berenberg has cut its target price from 1,640.0p to 1,350.0p, which still suggests a long way to go from current levels, and maintained a 'buy' recommendation on the stock.

Ahead of the results, the stock was trading at 15.6 times current-year earnings, which Berenberg said is a 60% discount to the five-year average valuation.

"We update our FY24E forecasts and now forecast 9% underlying revenue growth [previously 12.5%] and adjusted EBIT growth of 34% (inclusive of impact from acquisition). Our new price target is 1,350p, reflecting a higher [weighted average cost of capital] and updated forecasts," the broker said. "We flag the recent weakness as a buying opportunity. YouGov is benefiting from structurally growing end-markets, and it continues to take share and deliver above market growth."

Analysts at Canaccord Genuity nudged up their target price on Jersey-based uranium-focused company Yellow Cake from 635.0p to 645.0p on Tuesday following the exercise of the group's 2023 uranium purchase option with Kazatomprom.

Canaccord pointed out that Yellow Cake raised $125.0m, with $100.0m allocated to the KAP option and the remainder to be used for various purposes, including "opportunistic" spot market purchases. The analysts now estimate that Yellow Cake will have a total of roughly $40.0m in cash available.

In its most recent market update, Canaccord noted that additional buying by physical funds could also push spot prices rapidly higher, evidenced by price movement in the last month with a jump from roughly $61 a pound to approximately $74 per pound.

Recent market participant commentary from Canaccord's LatAm Resources Conference indicated that buying roughly 1.0m pounds in the current market "would take months" and require prices north of $70 a pound.

"With this in mind, the estimated ~$40m in cash available to YCA and a further ~$250m authorised for deployment by SPUT, we see market conditions resembling a 'tinderbox' with a price move to $80/lb (or beyond) likely in the short term," said Canaccord.

"We have revised our estimates to incorporate the most recent raise and financial reporting. We previously set our target price using our long-term price assumption of $75/lb; however, given the lack of spot material and the capital available from physical funds, in our view, short-term pricing could easily shoot past this level."