Broker tips: SolGold, Spirent Communications, Asos, Electrocomponents

Analysts at Liberum lowered their target price on mining outfit SolGold from 55.0p to 39.0p on Tuesday after the group again delayed publication of a pre-feasibility study.

Liberum noted that SolGold has pushed back the publication of a pre-feasibility study to late 2021, electing to do further work to address alternatives and potential upsides.

In the analysts view, the delayed release implied a large capex increase and a longer time to first production, leading it to reduce its price target on the stock by 30% to 39p.

However, Liberum highlighted that with most of the bad news "likely out of the way" and fresh management coming into the business, it still expects a bid once the Ecuadorian elections have passed, representing 73% upside to the stock's current price.

Spirent Communications got a boost on Tuesday as Canaccord Genuity upgraded the shares to ‘buy’ from ‘hold’ and upped the price target to 275p from 250p, as it said "growth acceleration" was around the corner.

Canaccord said technology is a growth sector and Spirent's slowing revenue momentum in 2H20 seems to be the reason for the company's more than 40% relative underperformance in the last six months.

"We view the current 'soft patch' as temporary and expect growth to re-accelerate from 2Q onwards, making this a compelling buying opportunity," it said.

Canaccord also said that following initial rollouts in key markets such as the US and China, Spirent should benefit from a wave of new 5G-related technology deployments such as OpenRAN, network slicing and private networks.

Analysts at Bank of America sounded a very 'bullish' on shares of Asos, adding them to their 'What's Big Small and Midcap Europe' list as well.

Among the reasons cited for the move, they said analysts' profit estimates were too low, the possible positive impact from the economy reopening on demand for its core "going out" product, the acquisition of Arcadia, "undemanding" valuation and "flexible fulfilment optionality".

They also explained that their 2021 profit estimates for the firm were 20% ahead of consensus while the purchase of Arcadia should boost growth and add to the company's margins, especially in 2022.

On the company's valuation, they pointed out that it was at a 50% discount to that of rival Zalando, with the shares changing hands on one time's the firm's estimated 2022 enterprise value to sales multiple.

Electrocomponents rallied on Tuesday as JPMorgan Cazenove upped the stock to ‘overweight’ from ‘neutral’ and hiked the price target to 1,103p from 799p, arguing that it’s a "great" company with an "OK" valuation.

JPM noted that trading in the third quarter bounced back quicker than anticipated, with 8% group like-for-like growth, versus a 4% decline in the second quarter.

"This will be offset by higher freight and other costs in the short-term; however, we regard these as temporary, whereas the market share gains are likely permanent," JPM said.

"Longer-term, the combination of its digital offering in a post-Covid world (circa 62% of revenues), and an emerging M&A strategy, with 3-4x the number of active M&A opportunities versus two years ago, means we can see the stock re-rating towards circa 30x price-to-earnings."

This compares to c21x FY2 P/E currently.