Broker tips: Relx, BP, Next

Analysts at JP Morgan sounded a bullish note on the prospects for RELX, the provider of information-based analytics and decision tools for professional and business customers.

On the back of a "fireside chat" with RELX boss, Erik Engstron, the day before, analyst Daniel Kerven said: "I am more excited about RELX now than at any time in the past 27 years."

Kerven went on to point out that the company's shares were both one of the investment bank's key picks in the media space and on its Analyst Focus List.

"Our investment case, put simply, is that improving mix and increased take up of faster growing data analytics will likely accelerate growth , drive compounding upgrades, a re-rating vs history and a closing / reversal of the 30% valuation discount to its US peers," the analyst continued.

In Kerven's opinion, he had "undercooked" the magnitude of organic growth in STM and Legal and the sustainability of growth in Risk.

Kerven had an 'overweight' recommendation and 2,810.0p target price on the company's shares.

Berenberg downgraded BP on Thursday to ‘hold’ from ‘buy’ but lifted the price target to 590p from 560p.

The bank said upside risks remain, linked to the high cash returns and any further speculation around BP being a bid target, but it is downgrading after the strong share price performance.

It noted that BP announced a new strategy at its FY22 results on 7 February, slowing the pace of the planned divestment of the upstream business while pledging to invest more in both its upstream business and in low-carbon technologies.

Growth and ROACE (return on average capital employed) targets were also upgraded, Berenberg said, partly due to higher commodity price assumptions and partly due to the extra investment.

"The stock reacted extremely positively to the update, rising 17% in three trading days, helped in our view by speculation regarding potential acquisition interest from US oil majors," it said.

"We view the update as positive from a shareholder perspective, but we believe the company’s strategy is now more closely aligned to peers - while its valuation has moved to a premium."

Analysts at BofA upgraded their recommendation for shares of Next from 'neutral' to 'buy', telling clients that the retailer's successful transition from online and directory to an omni-channel leader was underappreciated.

"In our view, NEXT presents a compelling value opportunity in omni-channel retail," analysts Daria Nasledysheva and Adam Gildea said in a research note sent to clients.

"Highly effective in driving synergies across online and offline channels, NEXT has successfully shifted from an offline and directory retailer to an omni-channel leader."

Indeed, its estimated growth out to 2026, operating margins, return on capital employed and cash conversion were all in line with Inditex and in many cases above the comparable metrics for H&M.

Yet Next shares were trading at a 40% valuation discount with its price-to-earnings multiple at 14 against about 23 times for those two rivals.

Furthermore, unlike Inditex and H&M, Next had the advantage of also retailing third-party brands and of its NEXT Total Platform.

The analysts raised their target price from 6,000.0p to 7,800.0p.