Broker tips: ABF, Easyjet, Entertainment One
Deutsche Bank upped its target price for Associated British Foods on the premise that it was set to continue benefiting from a consumer shift towards value driven by pressure on spending power.
To back up its case, it pointed to the company's 13% sales growth over the 16 weeks to 24 June and data from Kantar showing a continued loss of market share by the largest mid-market retailers while Primark was gaining.
Indeed, Primark had seen like-for-likes in the UK accelerate from growth of 2% during the first half to 6% during the third quarter.
According to Kantar data, it was also still gaining market share despite not being in the online channel.
Management was also succeeding in mitigating supply chain inflation as a result of the weker pound, Deutsche said.
Analysts at the broker said that was "particularly encouraging" and that the benefits should roll into the first half of 2018, giving them "greater confidence" that margins could be rebuilt next year.
Deutsche said it was also expecting significantly higher profits from sugar in the third quarter and for them to remain at their new level in 2018.
Analysts at Credit Suisse upped their recommendation on shares of Easyjet from 'neutral' to 'outperform', telling clients that a recovery in profitability to the levels seen in 2013 and 2014 was on the cards.
The Swiss broker marked up its estimates for the company's revenues per seat, due to improved summer trends, from -2% and -4% for the third and fourth quarters of 2017, respectively, to -1% and -3%.
That drove a 7% increase in their estimate for the airline's 2017 profit before tax to £420.0m. Credit Suisse also raised its 2018 estimate for the company's profit before tax by 17% to £534.0m.
Combined, those revisions saw the analysts bump up their target price on the shares by 24% to 1,583p.
Citi started its coverage of Entertainment One at a 'buy' and with a 295p target price, pointing to what in its opinion were multiple positive characteristics which had thus far gone unappreciated.
In a nutshell, as a sizeable standalone content asset in a fragmented market it was a "rarity", the broker said.
On the product side of things, its relationships with the major talent such as Mark Gordon and Steven Spielberg should drive strong revenue growth.
In terms of its addressable market, market forecasts failed to account for the optionality offered by success in Asia.
Financially, there were multiple levers the company could pull in order to boost profitability, Citi added.