Broker tips: Bakkavor, Funding Circle, Beeks Financial Cloud, Hargreaves Lansdown

Analysts at Berenberg lowered their target price on food manufacturer Bakkavor from 145.0p to 125.0p on Monday, stating pressures still lingered despite visible improvements.

Berenberg, which stood by its 'hold' rating on the stock, said Bakkavor's recent full-year results showed improved margins, accelerating international sales growth and an improved net debt position.

However, while the analysts said signs of improvement were "clear", they added that their optimism was "tempered".

"Cost inflation of 10-12% is forecast for FY22, which will weigh on margins and likely blur signs of operational outperformance," said Berenberg.

The German bank also highlighted that while it does believe downside protection to be present given the company's "undemanding valuation", it also thinks risks are balanced for now, until the "current challenging operating environment" improves.

Berenberg also initiated coverage on Funding Circle at 'buy' on Monday as it took a look at specialist lenders.

The bank, which set a price target of 120.0p on Funding Circle, noted that the company had developed a highly automated lending platform with about £4.5bn of loans under management.

"The first few years as a public company have not been easy for Funding Circle - its valuation has fallen by circa 80% since its IPO in 2018. However, we view this pessimism as somewhat misplaced. The company has already addressed a number of the issues with its business model and, from the start of this year, has had a new CEO at the helm," said the analysts.

Berenberg added that there were growth opportunities for Funding Circle both in its existing market and with the launch of new products.

Analysts at Canaccord Genuity nudged up their target price on software and services firm Beeks Financial Cloud from 210.0p to 220.0p on Monday after the group reported interim sales that beat expectations.

Canaccord Genuity, which reiterated its 'buy' rating on the stock, said Beeks' first-half sales were stronger than it had expected, while adjusted underlying earnings were in line.

The Canadian bank stated Beeks' outlook statement was positive and that it had upgraded full-year 2022-23 sales estimates in February after its first three Prox Cloud contracts were announced.

"With the new Prox Cloud offering gaining traction, combined with the underlying increase in Private Cloud offering uptake from tier 1 clients, we feel confident that sales growth can exceed 35% FY21/24 and margins increase from FY22est by c100bps pa in FY23 and again in FY24," said Canaccord. "We further increase our sales forecasts for FY22/23 with no change to adj EBIT and introduce FY24."

Jefferies downgraded Hargreaves Lansdown to 'underperform' form 'hold' on Monday and slashed its price target on the stock to 820.0p from 1,100.0p.

It gave two main reasons for the downgrade. Firstly, it argued that as the children of the 1960s approach retirement, they are likely to move from being natural clients of HL to needing advice and therefore leaving the platform in growing numbers.

"This brings our valuation down to 820p and our rating to underperform," it said, adding that there is still a lot going for HL. It noted that Hargreaves has a large and growing customer base and was successfully attracting a younger clientele.

"Being less wealthy, younger clients will not be as profitable as the older ones we think are leaving, but we believe HL/ is still likely to achieve 50% operating margins (management targets 55% in the medium term).

Jefferies said that although HL has an advice offering and is extending it, the likes of St James's Place were "better placed to take advantage of the trend".