Broker tips: Barratt Developments, Trainline, Boohoo

Berenberg said despite headlines, demand remained "exceptionally strong", as Barratt Developments' net private sales rate was 0.93x between 1 January and 1 May, 12% higher than last year and 18% above 2019.

As per seasonal trends, sales increased between February and May by roughly 3%, slightly below the period's historical improvement of around 5%, implying the rate was close to 1x in March and April.

Likewise, Berenberg also noted that Barratt's private order book stood at 8,117 units, up 25% year-on-year and equating to approximately £3.0bn in value. Prices for private reservations increased by 9% year-on-year, and management stated that there had not been any uptick in down valuations.

However, the German bank did note that likely strong gross margins in the second half will be offset by an increase in operating expenses following a group-wide salary review and said average outlets would probably only be marginally higher against 2021, compared to previous guidance of 3% growth.

Analysts at Deutsche Bank raised their target price on rail and coach ticketing platform Trainline from 268.0p to 319.0p on Friday after delivering "a relatively strong set of FY21 results".

Deutsche Bank stated the UK market is recovering strongly, and Trainline was benefiting from the rising penetration of eTickets, which now account for 42% of all ticket sales in Britain after doubling in the last two years.

The German bank noted that the introduction of digital railcards was improving "customer stickiness" and reducing the risk of losing customers to the new Great British Railways website/app when it launches.

DB, which stood by its 'hold' rating on the stock, also highlighted that Trainline management was also building momentum in Europe, where increased competition was creating "a material role" for a rail aggregator, something it thinks the firm is "well positioned" to take on.

"Management provided a guidance range for full-year revenues and profits, and this drives a 9% upgrade for our FY23 EBITDA forecast," said Deutsche. "However risks remain, with the full implications of the development of GBR yet to be made clear".

Boohoo shares slumped on Friday after Shore Capital cut its rating on the fast-fashion retailer to ‘hold’ from ‘buy’ on valuation grounds, also citing a lack of catalysts and challenges ahead.

"The recent high level of investment, while needed, has put the business in a less than desirable position," it said.

"Boohoo has gained significant market share over the pandemic but will need to trade further profitability merely to retain its position. With Boohoo shares almost back to the IPO price, could a takeover emerge?"

Shore Capital said that following the company’s full-year results earlier in the week, it is now concerned about the prospect of another year of negative free cash flow in FY23. It also said that significant margin investment is required and cut its estimates for FY23 EBITDA by around 50% to £96.5m. This is 15% below the mid-point of the implied FY23 guidance level of £113m.

The broker said it assumes flat sales in the year, versus guidance of low single-digit growth as the business faces tough comparatives and the cost-of-living impact in the UK, and remains uncompetitive abroad.

"While traditionally we would have seen Boohoo as a well-positioned offering the value space, we are concerned about the increasing reliance on the wholesale business," ShoreCap said.

Reporting by Iain Gilbert at sharecast.com