RBC Capital cuts CMC Markets price target after profit warning

CMC warned last month that annual net operating income would be lower than last year as revenues continued to fall in a "challenging" environment.

It said subdued market conditions had continued through August, with trading and investing net revenues trending 20% lower year-on-year.

RBC said it was cutting its net operating income by 18% on average across its forecast period following the recent unscheduled trading update.

"The drop-off in volatility seen year-to-date has been untimely for CMC as it has coincided with a period of elevated cost owing to investment in strategic initiatives," it said. "The operating de-leverage effect means earnings per share estimates fall by 70% on average.

"We look to 1H results in November for an update on medium-term targets, but in the interim we see valuation support from the high proportion of market cap now covered by surplus own-funds, and retain our outperform, speculative risk rating."