Canaccord downgrades Future to 'sell' on downside risk

Canaccord Genuity has cut its recommendation for Future Plc from 'hold' to 'sell' ahead of the specialist media group's annual results next week, saying it sees downside risk to market forecasts.

"Future has seen its shares rally over 40% from the lows in June 2023. As we head into the full-year results, due 7 December 2023, and look ahead to FY24, we believe there is material risk of downgrades to Refinitiv consensus," said analyst Karl Burns.

Burns cited a weak advertising demand backdrop as reported by others in the sector like Trade Desk, S4Capital, Reach and others.

"We believe consensus is overly optimistic, expecting group revenue growth (+1%) and flat EBITDA margins despite a deteriorating macro environment and structural pressure on the business. Peer updates have been weak, while global advertisers and retailers have reported weakness in consumer electronics, Future's largest revenue category (33% of sales)."

The broker's forecasts for the current year ending September 2024 are already 15% below consensus forecasts in terms of pre-tax profit, yet it still sees downside risk to its estimates.

Due to the uncertain outlook, the broker has cut its target price for the stock from 827p to 758p, well below Wednesday's closing price of 960p.

The stock was down 7% at 892p by 1029 GMT.