Sharecast News
10 Jan, 2022 17:32

Broker tips: JD Sports, Windward, British American Tobacco

dl jd sports fashion sign shop
JD SportsSharecast photo / Josh White

Analysts at Berenberg hiked their target price on retailer JD Sports from 240.0p to 285.0p on Monday ahead of the firm's Christmas trading update on 12 January.

Berenberg said it expects JD Sports to report another beat and a "typically" conservative start point for the coming year's guidance, given ongoing disruption due to Covid-19 pandemic-related restrictions and supply constraints.

However, the German bank noted that JD had "demonstrated time again" the "strength and resilience" of its brand and proposition, and best-in-class execution to navigate disruption well.

"JD remains in the sweet spot of strong consumer demand, and therefore we think there is scope for the company to positively surprise, even as comparatives toughen. We also expect disruption to accelerate the consolidation of sports retail, where JD will be

the prime beneficiary," said the analysts, who also reiterated their 'buy' rating on th stock.

"In this context, JD continues to look relatively cheap, in our view, for its quality and momentum – offering a faster-growing and more diversified alternative to owning the sports brands, with further M&A optionality and insulation from China. We raise our price target to 285.0p and view the recent pullback as a buying opportunity into a long-term winner."

Analysts at Canaccord Genuity initiated coverage on software firm Windward with a 'buy' rating and a 305.0p target price on Monday, stating it spied growth on the horizon for the firm.

Canaccord Genuity said Windward's artificial intelligence-powered software-as-a-service platform leveraged predictive intelligence, best in class shipping data and industry expertise to provide "actionable insights on maritime risk", noting the platform benefitted from a relatively low level of digital maturity, the desire to automate compliance processes to deal with ever-tightening sanctions, security and KYC due diligence rules and regulations, the need for better cargo/supply chain visibility, and increasing pressure on the industry to reduce its carbon emission footprint.

The Canadian bank highlighted that with more than 250,000 commercial organisations across the maritime and related trade and financing ecosystems, the company estimates a long-term total addressable market of roughly $10.0bn and has delivered a 2018-20 revenue compound annual growth rate of 31%.

"In our view, on 7.7x 2023 EV/Sales the shares trade at a justified premium to UK peers given our expectation for 30% organic growth. We set our 12-month target price at 305p, based on a blend of a 2023 EV/Sales of 7x, a 30% premium to peers as well as the NPV of our bull case scenario that values the shares on 5x 2025 P/Sales assuming a 65% 2021-25 sales CAGR. This scenario could be highly rewarding for investors as it would imply potential returns of ~220% to >700p/share over the next 3-4 years," said the analysts.

Barclays lifted its price target on British American Tobacco on Monday to 3,400.0p from 3,300.0p, arguing that the group's shares were at an inflexion point.

The bank, which maintained its 'overweight' rating on the stock, said BAT had been a frustrating stock to own over the last three years, with a total return of around 41% versus 50% for the MSCI World Staples Index. However, Barclays reckons this will soon change, thanks to two catalysts.

"First, BAT will start repurchasing shares soon - we think BAT could repurchase circa £10.0bn in shares by FY25 (circa 15% of market cap) and still see net debt/EBITDA decline from circa 3x in FY21 to circa 2x by FY25," said Barclays.

"Second, BAT will now start breaking out NGP (next-generation product) contribution losses; we think these are circa $1.0bn today."

Barclays also highlighted that at an 8% dividend yield and an estimated 7.5x 2022 price-to-earnings ratio, the stock was cheap.


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Pilling and Co Stockbrokers Ltd. is not responsible for the content or accuracy of third party news articles and we may not share the views of the author or publisher.

We provide third party news for your convenience and information only and make no representation or endorsement whatsoever and hereby exclude all liability for any loss or damage that may be incurred by you as a result of your access or use. Please note that third party content may be subject to terms and conditions imposed by the third party owner of that content.