Broker tips: AJ Bell, Corero Network Security

Analysts at Berenberg slashed their target price on online investment platform operator AJ Bell from 400.0p to 300.0p on Tuesday, citing a negative mark-to-market.

Berenberg said AJ Bell had posted "consistent" organic net inflows of £1.5bn in the three months ended 31 March, representing a roughly 7.9% annualised organic growth rate.

While the analysts also pointed out that total assets under administration fell by 2% to £74.1bn as a result of negative market movements driven by the invasion of Ukraine, they still saw the pickup in organic growth versus Q1, as being favourable, considering the "significantly higher levels" of uncertainty in the first quarter of the year.

The German bank also stated that AJ Bell had reported a negative investment performance of roughly £3.0bn over the period, representing a fall of 4.0%, worse than the MSCI PIMFA balanced index's roughly 3% fall over the same period. Markets have continued to slide and now down another 2% in April, meaning that further downgrades are ahead, added the analysts.

"While we think the organic growth numbers are supportive for the long-term investment case, we cut our estimates by 6-13% on the back of the lower market levels," said Berenberg, which reiterated its 'hold' rating on the stock.

Analysts at Canaccord Genuity slightly raised their target price on security systems company Corero Network Security from 24.0p to 26.0p on Tuesday, stating the "undervalued" stock represented a "profitable cybersec growth story".

Canaccord Genuity said Corero's January trading update suggested a "strong margin improvement" in the second half of 2021 and added that today's 2021 results highlighted maiden profits, with adjusted underlying earnings of $3.2m and 24% organic revenue expansion against a strong 2020 comparative.

The Canadian bank, which stood by its 'buy' rating on the stock, stated Corero's profitability metrics benefited from "a richer mix", with ongoing growth in software-only sales expanding gross margins to 85% in the year.

Although opex was broadly flat, the analysts anticipate recent sales, marketing and partner channel investments in future growth will expand this from here.

Canaccord said the demand environment remained "favourable" as frequency, complexity, and severity of DDoS attacks continue to increase and cybersecurity has been elevated to board-level priority.

"In addition, our analysis shows increasing regulatory pressure in Corero's end-markets to beef up cyber defences. In 2021 Corero meaningfully outgrew DDoS peers such as Radware, Arbor/Netscout, and Genie as well as its TAM and in 2022 we expect similar trends with our estimates implying sales growth will accelerate to more than 30% year-on-year," said the analysts.

"Management continues to execute on its strategic objectives with the now attained 'self-sufficiency' an important milestone. Small-cap investors wanting exposure to a fast-growing cybersecurity play can buy at an attractive 2.1x EV/Sales, a ~65% discount to listed peers."