Broker tips: Informa, IMI, William Hill, AstraZeneca

Citi said Informa shares could come under short-term pressure as the bank cut its target price on the company based on the expected impact of Covid-19.

The bank said it expected a deeper immediate trough caused by coronavirus disruption and a shallower recovery over the next three years. Citi cut its price target on Informa shares to 600p from 650p and put the shares on a 30-day "negative catalyst watch".

Citi analyst Thomas Singlehurst cut his forecast for Informa's 2020 earnings by 62% and his 2021 forecast by 24%. He cut his long-term forecasts for the events and information company by 10-15%.

Singlehurst said much of this news was already in Informa's share price and that the shares were a good bet over 12 months. He kept his 'buy' rating on the shares.

But he said "in the very short term, however, we worry that the market may get spooked" with first-half results and into the second half, he wrote in a note to clients.

Berenberg has upgraded its rating on IMI, arguing that market expectations for the British engineering group are too conservative.

In a note published on Wednesday, the bank said it had identified three core reasons for adopting a more positive stance, which has seen it increase its recommendation to ‘hold’ from 'sell'.

As well having increased confidence in the group's ability to retain costs savings, Berenberg said: "We believe market expectations for the full-year appear conservative and we sit 3% ahead of consensus earnings per share, and we support the shift in capital allocation to rebase the dividend and enable a higher rate of reinvestment in order to drive growth."

It did, however, sound a note of caution, arguing that following an 80% re-rating of the shares over the past six months, and "with lingering concerns about the longer-term growth prospects", there was better value elsewhere.

Berenberg also upped its price target for the FTSE 250 firm to 995.0p from 635.0p.

Analysts at Berenberg also raised their target price on bookmaker William Hill from 150.0p to 200.0p on Wednesday, citing some "encouraging" trends in the group's "robust" first-half update.

Berenberg, which reiterated its 'buy' rating on the stock, said William Hill had posted solid numbers both before and during the Covid-19 pandemic, with good revenue growth supported by shrewd cost control.

In the UK, the analysts said the roll-out of a new gaming front end yielded benefits with a better-than-expected fall in unique actives, driven by the disruption, and a good increase in average revenue per user, while the international online division benefited from product improvements and channel shift from retail as the company continued to diversify geographically, increasing revenues generated outside of the UK.

The German bank added that William Hill's operational performance had improved, its balance sheet had strengthened and highlighted that with investment continuing in the US business, it remained "positive" that future growth opportunities were not reflected in the current share price.

Analysts at Jefferies reiterated their 'hold' recommendation for shares of AstraZeneca following the pharma giant's decision to press the pause button on its phase three clinical trial for the Covid-19 vaccine under development alongside the University of Oxford.

The announcement might lead to a short-term stock correction which may prove misplaced, the analysts added.

In particular, they zeroed in on a report in The New York Times, according to which the single trial participant who had sickened was suffering from transverse myelitis, an inflammatory syndrome that affects the spinal cord.

First of all, they noted the company's explanation that the pause was a "routine" step whenever a potentially unexplained illness arose in a trial.

Furthermore, an expert with whom they spoke following the announcement had highlighted to them that virus vaccines that utilise adenoviruses - as was the case with AstraZeneca's AZD1222 - enjoyed a substantial and "enviable" safety dataset as they had been used for 60 years with US soldiers.

Nonetheless, that did not mean that new adverse events might not occur given that the adenovirus in question came from chimpanzees, the expert reportedly said.

Hence, the expert judged that the caution shown by AstraZeneca for this severe adverse event was "appropriate and warranted".

They also noted that AstraZeneca had committed to supplying AZD1222 at no profit during the pandemic, although a future commercial opportunity might arise if re-vaccination was required and viable.