Broker tips: Boohoo, Dominos Pizza, William Hill

Analysts at Credit Suisse reiterated their 'hold' recommendation on shares Boohoo, explaining to them that while business was booming, growth was set to slow and their valuation was already at historic highs and well above peers' and their own historical level.

Key to the investment thesis for the online fashion retailer, it was benefiting from a "structural shift" in the space, which in turn was being accelerated by the pandemic.

To its strong presence in social media and "superior" digital platform, the Swiss broker added the de facto elimination of physical rivals and the uptake of shopping for affordable wear as a form of entertainment.

Hence their forecast for 30% topline growth in financial year 2021, helped by market share growth in the US and Europe, but after a 45% year-on-year jump in sales in the first three months of the same, the rate of increase was set to slow.

The recent purchase of rival brands Oasis Warehouse would also help the firm expand its offering and attain higher price points, Credit Suisse said.

"This helps diversify the target consumer away from the value segment into middle market and is stretching the group’s price architecture," the analysts said.

CS marked up its target price for Boohoo from 400p to 440p on the back of a 22% upwards revision to their financial year 2021 EBITDA.

Analysts at Berenberg downgraded Domino's Pizza from 'hold' to 'sell' on Friday, stating the stock was now "too rich".

The German bank expected pressure from competitors more focused on growth and less on returns to continue to mount in the wake of the Covid-19 related lockdowns as more restaurants would consider providing delivery services as a way to supplement their income while in-store capacity is constrained by social distancing measures.

Berenberg also highlighted that Domino's has argued that trade since lockdown had been affected by the removal of collection, which typically makes up around 20% of store revenues but when collection reopens, the analysts pointed out that restaurants will too.

"Come that point, we expect many customers will swap back their Domino’s 'date nights' for restaurant meals," said Berenberg.

"With earnings growth likely to be negative in 2020 and lacklustre (at best) thereafter, we struggle to justify the size of the stock’s current valuation gap versus most leisure peers," added the bank, which transferred coverage to Owen Shirley.

JPMorgan Cazenove upgraded its recommendation on shares of William Hill to ‘overweight’ from ‘neutral’ on Friday, lifting the price target to 200p from 160p as it argued the recent placing reduces balance sheet risk and enables the group to capture US online market share.

"Earlier this week WMH took advantage of a share price recovery (from the March low of 37p), raising capital to meet investment requirements in the US while curing a leverage problem in advance of looming regulatory threats in the UK," it noted.

JPM said the £224m of gross proceeds from the placing relax the constraints on William Hill’s ability to chase the US sports betting and gaming opportunity and bring down the "uncomfortably high" leverage.

"We believe the new capital structure is capable of absorbing a possible regulatory shock (e.g. the potential imposition of £2 online slots stake limits from April 2021) and weakness in the UK retail estate," the bank said.

JPM said William Hill is now its "top pick" in the online-led gaming sector.