Jefferies upgrades AJ Bell to ‘buy’, shares surge

AJ Bell surged on Friday after Jefferies upgraded the shares to ‘buy’ from ‘hold’ and lifted the price target to 450p from 290p, citing higher forecasts and confidence in the company’s business model after results.

"Having previously said much of the benefit of higher rates would go to customers, management's 15% revenue margin guidance uplift is material," it said.

"We were already confident in the business model and move to buy, having upgraded to hold two months ago, when the price-to-earnings multiple troughed at 21x."

Jefferies also noted that the company expects to achieve a pre-tax profit margin of around 37.5%, up 2 percentage points year-on-year.

"We take confidence from both platforms achieving positive net flows in a tough environment," the bank said.

"Although uncertainties remain, AJB has demonstrated the resilience of its business model and we think its strategy will succeed."

It also said that longer-term benefits should flow from higher brand awareness and a bigger market footprint.

At 1040 GMT, the shares were up 10.8% at 398.74p.