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Berenberg reviewed its ratings on a number of leisure stocks on Thursday from pubs to restaurants and travel firms.
The bank downgraded JD Wetherspoon to ‘hold’ from ‘buy’ and cut its price target on the stock to 1,050.0p from 1,650.0p, stating it still thinks Wetherspoons is a very well-run business with a significantly differentiated value offer.
“However, we think it could be a while before the type of sales momentum needed to drive a meaningful re-rating from its already sector-leading valuation multiples returns to the business.
“As a result, we downgrade our rating to hold but continue to fundamentally like the shares in the event of any significant pullbacks.”
Wagamama owner Restaurant Group was upped to ‘buy’ from ‘hold’ with an increased price target of 125.0p from 110.0p, saying it has been warming up to Restaurant Group “for a while now”, and with the shares around 30% off last year’s highs, now was the time to upgrade the recommendation.
“With the right management now instated, we think that the company can grow earnings per share at a double-digit rate for the foreseeable future, believe there is scope for upside to our recovered earnings estimates in 2023 and beyond, and envisage the business being the market leader and natural consolidator over the medium term.”
Barclays hiked its price target on Royal Mail to 640.0p from 550.0p on Thursday, citing expectations of growth in FY23.
The bank said it expects “solid” Christmas trading, as indicated by the recent ‘Barclays UK Spend Trends’ discretionary retail spend signal.
“UK domestic volumes continue to be supported by antigen testing kits, which have grown on the back of the emergence of the Omicron variant,” it said.
Barclays also kept its rating on Royal Mail at ‘overweight’.
Analysts at Canaccord Genuity slashed their target price on marine engineering services provider James Fisher from 1,375.0p to 625.0p on Thursday but said they remained “chastened buyers” of the stock.
Canaccord said James Fisher had “a challenging 2021”, with three profit warnings triggered by a mix of Covid-19 pandemic-related demand slowdown, marine oil and gas slowdowns, specific customer challenges, and “a broader sense of the long-standing particularity of Fisher being lost”.
However, while the Canadian bank stated it was shifting forecasts, updating earnings to “more straightened circumstances” and “taking a more cautious view on dividends and cash generation”, it also highlighted that the key markets Fisher was exposed to were “starting to improve”.
“In particular, we see strong upside from the wave of activity in offshore wind, mostly going into 2023, and in the shorter term from recovering oil and gas markets globally,” noted the analysts.
“Given the softer markets, and the need to rebuild trust, we are moving our target multiple down to a much more sober 7x/6x 22/23E EV/EBITDA (at the peak of its pomp Fisher used to enjoy a double-digit EBITDA multiple) and our price target moves accordingly, to 625.0p (was 1,375.0p.) We remain chastened BUYers.”
