UBS upgrades Laird to 'buy' from 'neutral'

UBS upgraded Laird to ‘buy’ from ‘neutral’ on Wednesday but lowered its target price to 350p from 375p.

“We see four reasons to buy: 1) A stronger H2 in smart-phones (easier comparable period, new launches and penetration/content gains); 2) Auto (telematics) revenue materialising as a strong revenue stream to diversify the traditional perceived reliance on mobile devices; 3) The likely benefit over time of multiple antennae technologies (MIMO) penetrating mobile devices and infrastructure more fully; 4) The rising need for secure remote wireless controls.”

Last Friday Laird reported a 39% drop in first half underlying pre-tax profit to £16.4m, reflecting weak Apple sales, a decline in margins at the Wireless Automation and Control Solutions (WACS) business and integration issues with newly acquired Novero. The group said its overall expectations for the full year remain unchanged.

UBS said it believes Laird is likely to fix “controllable issues” by the year end and while smartphone risks remain it sees the market stabilising.

“Following the weak share price performance (-18% YTD) the valuation and risk-reward are more favourable. Buy.”

The bank raised its group revenue estimates by 7% in 2016, 107 and 2018 due to the positive impact of foreign exchange. However, UBS lowered its profit before tax and amortisation forecast by around 8% to reflect WACS and Novero integration issues.

Shares rose 3.67% to 306.03p at 0928 BST.