RBC Capital upgrades CVS Group to ‘outperform’

The bank noted that CVS shares are off almost 30% and Pets At Home is down 8% on the news of the CMA market review into the vet practice market.

"CVS is more exposed to potential remedies than Pets At Home, but we expect these to only be behavioural at this stage, and think that CVS' exposure is mitigated by its existing online pharmacy, its Healthy Pet Club, and the likely significantly lower margin at its independent competitors that could limit the potential for more harsh changes," RBC said.

The bank cut its price target on CVS to 1,900p from 2,200p to account for the sentiment overhang and "unknown unknowns" that could result from the review. Despite still seeing some downside to consensus for its higher non-operating expense projections, it upgraded the shares as it thinks they have fallen too far.

"We remain cautious on Pets At Home, however, as we continue to see downside risk to consensus for the retail division, and think that sentiment may also be challenged by the CMA review," RBC said.

It maintained its ‘underperform’ rating on Pets and cut the price target to 280p from 300p.