Barclays downgrades Daily Mail to 'underweight'

Barclays downgraded Daily Mail & General Trust to ‘underweight’ from ‘equalweight’ and cut the price target to 705p from 715p.

The bank said it sum-of-the-parts valuation points to clear downside versus the current shares and that the stock is overvalued when looking at free cash flow yield.

Barclays noted that since the start of the year, the shares have outperformed the FTSE All Share by 4%.

“We see the potential for downgrades and a derating, given that on calendar 2017 free cash flow yield DMGT trades at 5.3%, notably more expensive than WPP, Informa and UBM (all 7-8%).”

The bank said the stock was being underpinned by hopes that the new CEO will announce a dramatic change to the portfolio.

“But we do not expect change of the scale required to excite the market,” it said.

Barclays said the next catalyst will be the full-year 2016 results in December, where it expects the outlook for FY17 to drive consensus downgrades.

The bank also highlighted cyclical concerns such as the accelerating decline in UK print newspaper advertising.

At 0830 GMT, the shares were down 4% to 765.50p.