Broker tips: Rolls-Royce, YouGov, Endeavour Mining
Rolls-Royce rallied on Tuesday as JPMorgan Cazenove hiked its price target on the stock to 535.0p from 475.0p "after another set of strong results".
JPM said it was increasing its 2024-27 earnings per share estimates by 9%/8%/7% after Rolls' H124 earnings came in well ahead of consensus, and its 2024-27 free cash flow estimates by £261m/£171m/£143m/£34m .
"We increase our multiples-based Dec-25 price target by 13% to 535p reflecting higher EPS estimates and a slightly higher target valuation multiple, justified by the increasing evidence that RR is becoming a more resilient company," it said.
JPM, which has an 'overweight' rating on the stock, said its new price target implied 20% potential upside over the next 18 months.
Analysts at Berenberg slashed their target price on market research and analytics firm YouGov from 1,200.0p to 810.0p on Tuesday morning following the group's FY24 trading update.
Berenberg noted that after YouGov's profit warning on 20 June, management updated guidance for FY24, with its performance now expected to be "slightly ahead" of revised guidance at £327.0m-330.0m in revenue and adjusted underlying earnings of £43.0m-46.0m - 1% and 5% ahead of previous guidance, respectively.
Given the relatively lower expectations, YouGov said it would implement a cost-savings programme, which will deliver an annualised saving of £20.0m by FY26, with 70% to be realised in FY25.
In terms of FY25, YouGov expects its performance to be in line with current market expectations. However, the German bank lowered its FY25 revenue and adjusted-EBIT forecasts by 2% and 9%, respectively.
"Shares are trading on a 11.7x FY25E price-to-earnings ratio and a FY25E free cash flow yield of 9.4%. We reduce our price target to 810.0p (from 1200.0p), predominantly reflecting more conservative assumptions to outer year growth and margins. The implied upside to our new price target is circa 85%," said Berenberg, which stood by its 'buy' rating on the stock.
RBC Capital Markets downgraded Endeavour Mining on Tuesday to 'sector perform' from ‘outperform' given its cautious view around rising operational and geopolitical risk, which it noted comes amid significant management changes this year.
"While we remain constructive longer term, we note elevated near-term risk given technical complexity ramping up two new projects, with increasing investor aversion to West Africa given volatility of economic stability agreements," RBC said.
The bank cut its price target to CAD40 from CAD48 on a more conservative outlook and modestly lower target multiples reflecting increased risk.
"In our view, extensive management turnover within the EDV executive team this year comes amidst a key growth phase, placing emphasis around execution ahead," RBC said. "Coupled with fallout from the CEO termination earlier this year, we view heightened emphasis on execution in navigating a key period ahead."