Broker tips: Hargreaves Lansdown, Biffa, AstraZeneca

Analysts at JP Morgan reiterated their underweight stance on Hargreaves Lansdown due to the combination of their forecasts for a drop in UK gross domestic product in 2023, alongside "elevated" inflation and the rise in overall living costs, amongst other factors.

Driving the latter, they pointed to the large increase in mortgage costs on the back of interest rates increases.

That led them to analyse how that combination might impact flows to wealth managers and platforms.

"Overall, we see greater risks for the UK and Nordics (vs. Italy) names, as well as D2C platforms (vs. financial advisors), due to a combination of unfavorable economic conditions, mortgage market structure and client demographics," they said.

Against that backdrop, their "key" underweights were Hargreaves Lansdown (Target price: 770p) and Swiss outfit Avanza (Target price: SEK140).

Berenberg downgraded Biffa to ‘hold’ from ‘buy’ on Thursday and cut the price target to 415p from 465p as it updated its forecasts ahead of the latest ‘put up or shut up’ (PUSU) bid deadline on 30 August, and following the recent full-year results.

"With a potential bid from Energy Capital Partners (ECP) to come at 445p, versus a break price that we consider to be below the current level, we downgrade our rating to hold, while considering that a 445p offer (implying circa 10% upside) remains the most likely outcome from here," it said.

The waste management company announced in June that it had received a "series of unsolicited and indicative proposals from affiliates of ECP", with a proposal of a 445p offer price that the board would be minded to recommend, should the offer be made.

At that point, the offer was subject to due diligence. Since then, the PUSU deadline has been extended twice.

"However, the reason for this extension was stated as because ‘discussions between ECP and potential financial providers are still ongoing’, implying that due diligence is now complete, and the only barrier to a bid is ECP’s completion of debt financing for the deal," Berenberg said.

"Given Biffa’s majority non-cyclical earnings streams, the relatively low cost of Biffa’s long-term private placement debt facilities (2.5-2.7%) and the size of recent deals that ECP has completed (c£1.4bn on two takeovers in 2022), we expect that deal financing is a formality that will conclude relatively soon."

As far the FY results are concerned, Berenberg said they were in line with expectations, showing a strong recovery from the pandemic.

Analysts at ShoreCap doubled down on their recent reinitiation of coverage on AstraZeneca with a 'buy' recommendation, citing growth and pipeline prospects.

For 2022, they were confident that the company was capable of posting 18% sales growth.

Similarly, they expressed "conviction" in its ability to sustain longer-term growth.

In turn, they said, that justified their fair value estimate for AstraZeneca's shares of £123 they said, which implied an FY2023 price-to-earnings multiple of 20.5 times, against about 17.1 times at present.

By way of comparison, its peers were trading on 15.3 times earnings estimates, but the premium was warranted given the drug giant's industry-leading earnings growth and the prospects for its pipeline.