Broker tips: Shell, Standard Chartered, Team 17, AJ Bell

RBC Capital Markets has raised its forecasts for Shell and kept an 'outperform' rating, saying the business was "firing on most cylinders" in the quarter.

"Over recent years, Shell has had a number of stellar quarters; however, in between these there have been a number of operational issues that have hampered performance," RBC said in a research note on Friday. "1Q results were evidence on what the business could look like if it was firing on most cylinders, and the result is higher CFFO [cash flow from operations] and FCF [free cash flow] than its US counterparts."

Shell reported adjusted earnings of $7.7bn, up from $7.3bn in the fourth quarter and some 20% ahead of consensus estimates, along with stronger-than-expected cash generation. However, RBC said investors should focus on operational data points which were "encouraging".

"In particular, LNG liquefaction volumes came in at the top end of guidance, while downstream availability was also strong. A key focus of the new management team has been to sweat the asset base harder, and it does appear there is evidence of operational momentum. How long will it last? Time will tell," said RBC, which has a 3,000.0p target price on the stock.

Analysts at Berenberg raised their target price on multinational bank Standard Chartered from 1,050.0p to 1,100.0p on Friday after the group's Q1 earnings "validated" management's suggestion that the bank had experienced "an encouraging start" to the year.

Berenberg, which has a 'buy' rating on the stock, noted that underlying trends within the business also increased its confidence in the bank's ability to grow revenues year-on-year throughout FY24 and beyond.

Following actions to substantially hedge interest rate risk, the German bank also believes that the sustainability of Standard Chartered's revenues and growth remains poorly appreciated.

"Indeed, lower interest rates may create additional cyclical support. While the shares rose by circa 9% following the Q1 2024 results on 2 May, the bank's 0.6x TBV valuation poorly reflects our FY 2026E RoTE of 12% (in line with guidance). Our new 1,100.0p price target implies circa 50% upside," said Berenberg.

"Our underlying EPS for Standard Chartered increases by 3-5%. We now expect a 12% FY 2026E RoTE and an annual total yield (dividends plus buybacks) of c10-11%. These returns, and Standard Chartered's growth, are poorly reflected in the share price, trading on 0.6x TBV. Our 1,100.0p price target (up from 1,050.0p) values the bank on 0.9x TBV and implies 50% upside."

Citi has reiterated its 'buy' rating for British video game developer Team17, saying it sees significant upside to its valuation as operations stabilise.

"Team17 is at an interesting juncture in its trading history. While continuing to deliver growth in recent years, partly aided by acquisition, the cooling of sentiment within the video games industry coupled with disappointing underlying profitability has weighed not only on forecasts but also on the multiple," said Citi.

The company reported a loss before tax of £1.1m in 2023, compared with a profit of £28.7m the year before.

"2024E, however, sees a new CEO, who is clearly focused in the short-term on increasing the group’s rigour and discipline around its commercial practices and how it allocates capital."

Citi expects a "stabilisation" of organic performance this year, with a small increase in revenue and a rebound in margins, before an acceleration thereafter. If Team17 can deliver, the stock could see a rerating, Singlehurt said.

The analysts also noted that the shares currently trade at 12 times prospective earnings, compared with Europe-listed peers at 16x and US peers at 20x.

Jefferies downgraded its stance on AJ Bell on Friday to 'hold' from 'buy' after a circa 30% rally in the shares this year.

The bank also made a 3% reduction to its FY24 earnings forecast and cut its price target on the stock to 361.0p from 390.0p.

"AJB remains a high-quality business in our view, but we see valuation as fair, with our PT implying 20x FY24 and FY25 earnings," Jefferies said.

The bank said it's possible that the interim results on 23 May might reveal further upside, but added that it's already ahead of guidance on profit before tax margin.