Broker tips: Laird, Randgold, KAZ Minerals

Stifel upgraded technology company Laird to 'buy' from 'hold' on Thursday, saying the recent selloff is overdone.

It noted the share price is down 28% since October's third-quarter trading update, with investors worried about end volume demand and margin pressures from a key customer - which Stifel assumes is Apple - and foreign exchange exposure amid a weakening dollar. In addition, the share price has also been hit by a wider downturn in the markets.

The bank cut its 2018 estimates to reflect a £21m drop year-on-year in smartphone-related revenues and for FX movements.

"Apple’s revenue guide into 1Q ($60-62bn; consensus $65bn) all but vindicated speculation that Apple could cut the production of the iPhone X from 40m units to 20m units in 1Q. As such Laird is exposed to smartphone cyclicality and we now model for a £21m y/y drop in revenues from Apple in 2018e (£12-13m modelled prior)."

Its earnings per share estimates for FY18 are unchanged but it trimmed its EPS forecasts for 2018/19 by around 5% and in turn its price target on the stock to 135p from 160p.

Still, it said Laird's valuation is now "overly conservative", hence the upgrade, adding that the stock price fall has more than accounted for margin/volume pressures faced in the company's smartphone business.

Analysts at HSBC upgraded their recommendation for shares of Randgold Resources on Thursday from 'hold' to 'buy', telling clients they expect the outfit to hike its payout by 50% in 2018 after the company reported record production and increased profits for its most recent trading year.

In the same research note, the broker revised its target price for Randgold down to 7,700p from its previous 7,800p estimate, explaining that the positive impact from gains on the back of an expected 3.5% increase in its US dollar valuation was offset by revisions to its assumptions for the pound sterling.

The Asia-focused lender went on to explain that after a "somewhat pedestrian" third quarter, the firm had returned a "rock solid" performance in the three months leading to 31 December, with a 12% year-on-year jump in group sales, alongside a 6% retracement in unit costs and a 19% jump in profits received from mining.

HSBC also highlighted how Randgold remained debt free with a closing cash balance of $720m, up 39% year-on-year, helping to support the 54% boost to its full-year 2017 earnings per share of $2.96 and $2 a share annual dividend payout.

"We expect Randgold's operational outperformance and unrivalled track record of discovering and developing high-quality assets in West and Central Africa to continue to set the group apart. Over time these qualities have resulted in low volatility relative to peer group and earnings multiples that trade at sustained and substantial premia."

Barclays upgraded its view on KAZ Minerals on Thursday, telling clients the recent pullback in the stock had opened-up an unusually large valuation gap relative to peer Antofagasta.

Yet following Kaz's recent restructuring, it was "fundamentally" changed; indeed, the broker's analysts argued it was now a superior business from several standpoints.

Those included its cost position, free cash flow conversion and growth potential and, as a result, the broker decided to up its view on KAZ shares to 'overweight'.

"Rising inflation is strongly correlated with higher copper prices over the last 60 years: every 10% change in copper is 20% on KAZ EPS, all else equal."

The shares' return to their August 2017 levels also made them much more attractive, the analysts said, having pushed the price-to-earnings discount for the shares relative to rival Antofagasta from its historical level of 32% to 54%.

Thus, even a simple mean reversion in the discount would entail a 22% jump in the share price, they said - the main driver of their 1,015p target price.

Should the discount narrow even further, on the back of Kaz's improved fundamentals, reaching parity with Antofagasta for example, that would imply a target of 1,442p, which was Barclays's 'upside' case.