Broker tips: WizzAir, Pearson, Glencore

Thanks to its high profitability and niche position low-cost carrier Wizz Air is in a favourable position to weather increased competition and stands to benefit from the turbulence which some of its competitors have run into, analysts at HSBC said.

As well, its CEE market is less exposed to "competitive growth", the broker emphasised.

Furthermore, its low unit costs means it can compete with Ryan Air - the European cost leader - toe-to-toe.

For those reasons, analyst Andrew Lobbenberg maintained his 'buy' recommendation on the stock while upping its target price to 2,220p from 1,900p.

"Given its track record selling down after other IPOs, we would not be surprised, and also not concerned, by a placing from the major holder of convertibles, Indigo Partners."

Pearson rallied on Thursday after Citigroup reinstated coverage of the stock at ‘buy’ with a 1,425p price target, pointing to the scope for improving revenue trends, better free cash flow and potential for accretive cash usage.

The bank said there are five reasons why it’s bullish now.

It said that despite the overhangs in testing, the worst is behind us in terms of challenges to underlying growth.

Citi said that as the business returns to steady state growth – in particular within higher education – it expects margins to revert to historic levels.

In addition, Citi said it reckons the market underestimates the potential for a rebound in free cash flow, giving extra comfort in the cash-based valuation.

The bank said it sees scope for EPS/FCF upgrades from accretive cash usage.

Investors´ worries that Glencore´s need for financial liquidity might drive it towards the brink of bankruptcy - or worse - were wide of the mark, one of the world´s largest brokers said.

The outfit remained both solvent and liquid, Citi said.

Indeed, they estimated it would not need to approach debt markets until 2017 and therefore current market pricing of its risk of default - a measure of financial stress - remained a "theoretical number", they said in a research note sent to clients on Thursday.

Furthermore, the syndicate of banks behind Glencore was sixty-strong and "have been dealing with the company for decades and presumably have good understanding of the business."

Lastly, contrary to some market watchers Citi expected the drop in commodity prices to 'release' significant working capital - a key determinant of a firm´s liquidity - and there was margin for an upside surprise from the sale of its agriculture marketing business.

Citi had a ´buy´recommendation and 170p target on the stock.