Broker tips: AstraZeneca, Daily Mail, Domino's

Liberum upgraded AstraZeneca to ‘buy’ from ‘hold’.

The brokerage had harboured concerns about the risks to the company’s global Phase 3 study of durvalumab, MYSTIC, earnings weakness and bid speculation unwinding.

However, with the stock down around 20% and at low not seen since late 2013 in US dollar terms, Liberum it “can’t ignore that the risk/reward going into a rich of catalysts is now strongly to the upside”.

“We believe the current valuation is effectively assuming zero from the high potential immune-oncology programme,” Liberum said.

The brokerage reckons the shares are worth up to 6,000-6,400p in the of durva-treme success in the key Phase 3 studies reporting through 2017. If they fail, there would likely be short term downside, but there is fundamental value in the 4,500p range.

Even without durva-treme, Liberum thinks earnings growth of around 9% per year between 2017 and 2021 is achievable.

“If lower risk Tagrisso and Lynparza come through, 12% is more likely. We think this level of growth more than justifies upside to the current share price and is supportive of a range around £45-48/share (7-14% upside) ex-durva-treme.”

Liberum has a 5,200p price target on the stock.

Barclays downgraded Daily Mail & General Trust to ‘underweight’ from ‘equalweight’ and cut the price target to 705p from 715p.

The bank said it sum-of-the-parts valuation points to clear downside versus the current shares and that the stock is overvalued when looking at free cash flow yield.

Barclays noted that since the start of the year, the shares have outperformed the FTSE All Share by 4%.

“We see the potential for downgrades and a derating, given that on calendar 2017 free cash flow yield DMGT trades at 5.3%, notably more expensive than WPP, Informa and UBM (all 7-8%).”

The bank said the stock was being underpinned by hope that the new CEO will announce a dramatic change to the portfolio.

“But we do not expect change of the scale required to excite the market,” it said.

Barclays said the next catalyst will be the full-year 2016 results in December, where it expects the outlook for FY17 to drive consensus downgrades.

The bank also highlighted cyclical concerns such as the accelerating decline in UK print newspaper advertising.

Analysts at Canaccord Genuity lifted their recommendation on Domino´s Pizza from 'hold' to 'buy' after the company reassured them at its Investor Day 'that it can continue to deliver', although the menu was changing.

The company now aims to double the number of its stores in its territories over the next decade, but will continue to return surplus cash to shareholders via a progressive dividend policy, supported by a share buy-back programme.

That follows a sharp slowdown in the rate of growth of the company´s like-for-like sales for the third quarter from 14.9% one year ago to just 3.9%.

Hence, Domino´s has shifted towards expanding its footprint and now believes it can double the number of its establishments over the next decade, to roughly 2,000, excluding Germany, with the bulk of that coming from the UK and London in particular.

Canaccord´s Nigel Parson also said the firm continued to score well on several metrics which were important to him, such as return on invested capital, balance sheet strength, cash conversion and earnings growth.