Broker tips: Boohoo, Diploma, Royal Dutch Shell

Credit Suisse lifted its stance on shares of fast-fashion retailer Boohoo to ‘neutral’ from ‘underperform’ on Friday.

CS noted the shares have fallen 32% since the first-half results at the end of September.

"Our argument at the time was that there was significant risk to the company’s plan to adopt the Levitt report recommendations, and that news flow was likely to be negative, casting doubt on execution, as has been the case," it said.

"However, with the company presumably still trading well, we believe the risk/reward and likely news over the next three months is more balanced."

The bank trimmed its price target to 300.0p from 320.0p on lower peer valuations but said trading updates should reassure and Boohoo may look to publish an update after Black Friday ahead of the P3 report in mid-January.

"Of the company’s extensive to-do list, delivering on the promised senior hires would seem the most achievable in the coming months and should be well received," CS said.

Analysts at Berenberg hiked their target price on technical products and services group Diploma from 1,460.0p to 2,150.0p on Friday following a "highly complementary acquisition".

Berenberg stated that Diploma had historically managed to maintain a balanced growth profile through the cycle, with any slowdown in organic revenue growth generally being offset by countercyclical merger and acquisition activity.

The German bank highlighted that with the third quarter of 2020 witnessing a record organic revenue decline, it was "fitting" that it was followed by the group's largest-ever acquisition, Windy City Wires, for $465.0m.

"We think this is an excellent deal for Diploma, given WCW's attractive growth prospects, scalable business model and healthy returns profile," said the analysts.

Berenberg noted that the deal was partly funded through a 10% placing, ensuring the group's balance sheet remained "conservatively financed".

"We update our forecasts to reflect the WCW deal and placing, but retain our 'hold' rating on valuation grounds," said Berenberg.

Barclays upgraded Royal Dutch Shell to ‘equal weight’ from ‘underweight’ on Friday as it pointed to "an opportunity in change".

The bank said that in presenting a new financial framework this week, Shell has addressed its key concern, hence the upgrade.

"The new framework sets clear priorities for dividend growth, debt reduction, additional shareholder returns and further growth capex," it said. "On our own numbers, we expect Shell to hit its new target net debt level in at the end of 2021 with the potential for $2.0-6.0bn (2-7%) extra returns to shareholders per year beyond this."

Barclays also noted news that Shell’s business model will be restructured into three core areas: upstream, transition businesses and growth businesses.

"This framework aligns with our own approach and should help demonstrate the real strengths that Shell has in a lower carbon world," it said.

"We believe there is more to come from Shell strategically, but it is the combination of the establishment of a financial framework together with the potential cash generation we see that leads us to lift our rating to equal weight."

Barclays left its price target on Shell unchanged at 1,500.0p.