Broker tips: Keywords Studios, Burberry
Analysts at Berenberg raised their target price on video games developer Keywords Studios from 2,250.0p to 2,510.0p on Monday, stating the firm now had a "stronger" mid-term growth outlook than before.
Berenberg said Keywords Studios had delivered "a very robust" first-half performance in 2020, as it had expected, with the "scale and reliability" provided by the company during Covid-19 had driven its clients to deepen the group's integration into the development value chain.
The German bank highlighted that this was supported by the number of clients that use three or more services increasing from 108 to 124 over the last six months, something the analysts said "bodes well" for Keyword's mid-term growth.
"The video games industry is in rude health, so KWS will enter 2021 with a stronger mid-term growth outlook than before," said Berenberg, which also reiterated its 'buy' rating on the stock.
"We expect Keywords' addressable market to outgrow the video game segment (at a 7% compound annual growth rate) as developers continue to outsource a larger percentage of the development cycle.
RBC Capital Markets upgraded Burberry to 'sector perform' from 'underperform' on Monday, lifting the price target to 1,620.0p from 1,450.0p as it pointed to limited downside risk following a 28 percentage point year-to-date relative share price underperformance.
It also pointed to a valuation de-rating of 8% versus a sector re-rating of +14% and said the potential for a second-quarter 2021 beat was a positive near-term catalyst, while FX upgrades for FY21 estimates are in contrast to European peers.
RBC said it reckons Burberry will beat its fiscal 2Q21 retail like-for-like target of -15 to -20%, reflecting a revenue recovery profile similar to peers with healthy trends in mainland China and improving trends in North America, despite a soft European market.
It also estimates £22.0m of FX transactional benefit for FY21, which it said is not fully reflected in consensus.
"We believe Burberry's established presence in digital coupled with strategic improvements to product and merchandising should support further improvements in brand heat and revenue recovery in the coming quarters," it said.