Broker tips: Antofagasta, Entain, JD Wetherspoon, British Land, Land Securities, WPP, EasyJet

RBC Capital Markets upgraded its stance on Chilean copper miner Antofagasta to 'outperform' from 'sector perform' on Thursday and hiked its price target on the stock to 1,800.0p from 1,300.0p.

The Canadian bank said a rapid tightening in expected copper supply has brought forward a medium-term bull market.

"We are now 9% ahead of consensus prices for 2024/25," RBC said. "With Centinela's second concentrator now approved, ANTO has the highest forecast copper-equivalent growth in our large cap coverage. This, and improving prices should double earnings by 2028."

RBC expects the company to remain modestly free cash flow positive through construction.

"ANTO is expensive, but should stay this way with dual drivers for earnings growth," it said.

Citi has resumed coverage of Entain with a 'buy' rating, saying it sees upside potential from the gambling group's US operations.

Despite an 18% gain in the past month, shares in the Ladbrokes owner have fallen by more than a third over the past year. In August 2023, the stock took a tumble after its US joint venture partner MGM Resorts announced plans to launch a UK online betting site, while the company has disappointed with updates about falling online net gaming revenue. That culminated with the resignation of chief executive Jette Nygaard-Andersen in December.

"Our [sum-of-the-parts] framework suggests no value is being ascribed to ENT’s 50% stake in BetMGM (US JV), which we see as overly negative given recent changes to ENT’s management (CEO step down), shareholder register (activist investors), and board (Eminence founder now [non-executive director]), which we think is likely to increase ENT’s receptiveness to value-unlock opportunities," Citi said.

"We are cautious on its ex-US business with our FY24 revenue estimate at the low-end of guidance, but acknowledge market expectations have been rebased following Entain’s downgrades to online NGR growth and expect recovery to be led by UK, Australia, Brazil."

Shares in pub owner JD Wetherspoon were rising on Thursday on the back of positive comments from Numis, which upgraded its rating on the stock from 'reduce' to 'buy' after factoring in the company's recent improvement in trading.

"Various sources suggest a strong Christmas period for the pub/restaurant sector: (i) Opentable bookings were +4% in December (-1% November), (ii) Barclaycard data at 7.9% was also an acceleration (360bp) and (iii) the Morning Advertiser polled publicans, of whom 50% said Christmas trading exceeded expectations," Numis analysts Tim Barrett and Richard Stuber said in a research note.

As a result, the broker is now pencilling in a 4-percentage-point improvement in JDW's like-for-like growth, resulting in overall LFL growth for its second quarter of 12-13%. However, visibility for the remainder of the year is low and depends a lot on the company's "tactical decisions on pricing".

Numis has now increased its full-year like-for-likes sales growth forecasts from 8.5% to 10%, and includes in its forecasts a £40.0m total share buyback – following the repurchasing of £30.0m of stock so far this financial year.

The analysts said: "Our new forecasts look to be at the top of the consensus range and imply a FY24 [price-to-earnings multiple] of 19x and free cash flow (FCF) yield of 6.4%. At a 7% target FCF yield we set a target price of 750.0p and upgrade to a 'hold' rating."

Analysts at Berenberg initiated coverage on real estate businesses British Land and Land Securities with 'buy' ratings on Thursday and noted that the groups were still seen as proxies for the UK real estate sector.

Despite only representing roughly 17% of the market cap of the UK real estate investment trust sector, half of what it was a decade ago, Land Securities and British Land have both benefited from a reduction in swap rates and bond yields in Q4 2023, as they provide equity investors with "a liquid and diversified way" to increase their exposure to the interest-rate-sensitive UK real estate market.

While the German bank noted that discounts to net asset value offered by the pure London office REITs "may look more attractive", British Land and Landsec provide "a less concentrated exposure" to what it still sees as being "an uncertain London office market", together with access to the retail property sector, which it believes has bottomed and should "show selective growth".

"Investors can take their pick of retail warehouses (British Land) or destination shopping centres (Landsec)," said Berenberg, which thinks "any weakness" represents a buying opportunity and issued the former with a 469.0p price target and the latter an 807.0p target.

Berenberg also pointed out that a "relatively attractive earnings yield" of 7.1%, combined with discounts to NAV, offered investors the "best of both worlds", providing a steady income return while waiting for NAV growth to re-emerge, hopefully resulting in an improvement in NAV rating.

"We recognise that earnings growth for both companies is going to be minimal over the next few years, but the high earnings yield accounts for that, in our view. After a strong Q4 2023 (Landsec up 21%, British Land up 31%), both companies have unsurprisingly given up some share price performance since the recent high (-4%), in line with the wider UK REIT sector," Berenberg said.

WPP slumped on Thursday after UBS double downgraded the shares to 'sell' and slashed its price target on the stock to 700.0p from 1,200.0p.

The bank said it expects depressed levels of free cash flow this year, and for organic growth to be below consensus expectations and peers in the medium term.

UBS said cuts to advertising spend from TMT (technology, media and telecommunications) clients were likely to continue. This is a problem for WPP, as TMT represented 26% of net sales in FY22.

The banks said recent reports of a potential sale of WPP's stake in Kantar were "helpful" but noted the timing remains uncertain.

Bank of America Merrill Lynch upgraded easyJet on Thursday to 'buy' from 'underperform' and lifted its price target to 640.0p from 470.0p on European capacity constraints.

The bank said it sees growth benefiting from capacity constraints in Europe, a bigger contribution from the holidays segment and stable ex-fuel unit costs.

BofA lifted its FY24 pre-tax profit estimate by 14% to £549m, which is 3% below consensus, as it models one percentage point higher year-on-year load factors in FY24E and for cost per seat to remain flat.

The price target change comes as the bank moves its valuation to a target price-to-earnings multiple of 11x, applied to its higher earnings estimates.

"We move back to a PE methodology as easyJet's earnings and leverage have improved after the pandemic," it said. "At 9x FY24E P/E, the shares trade below their 12x historical average, which we think is unjustified, given solid earnings growth prospects and a strong balance sheet."