Broker tips: Rightmove, HSBC
Berenberg upgraded Rightmove to 'hold' from 'sell' on Tuesday and hiked the price target to 710.0p from 455.0p as it said the stock's valuation was full but "not extreme".
"We conclude that our previous thesis - that Rightmove would experience slowing top-line growth and margin pressure as it struggled to extract higher average revenue per advertiser from its estate agency customers - is unlikely to play out in the medium term," the bank said.
Berenberg said that with the UK real estate market in rude health, and likely to remain robust even once the reduced stamp duty incentive comes to an end in September, it is hard to see what could really hinder Rightmove.
"The company has survived multiple challenges from start-up competitors, and undoubtedly agents would rather they were less dependent on the portal; however, that dependency remains high, and stiff competition between agents in a tight market means that they a) need to maintain their portal listings, and b) need Rightmove’s new products," it said.
Berenberg said that with an unlevered free cash flow yield of 3.4% for 2021, Rightmove’s valuation does not look unreasonable given its premium market positioning and potential for further growth, particularly in rental (near term) and consumer services (longer term).
Analysts at Credit Suisse stayed at 'hold' on shares of HSBC on Tuesday, noting the lender's outlook for interest rates and the likelihood of share buybacks being announced soon.
Credit Suisse, which also reiterated its 465.0p target price on the stock, stated it now expects a $1.0bn share buyback to be announced alongside the lender's full-year numbers.
"We expect the final size of the buyback programme will be impacted by whether 3 or 4 bolt-on acquisitions HSBC is looking at in Asia Wealth go ahead," the analysts added.
On interest rates, HSBC had noted how one-month HIBOR had "only" fallen by one basis point so far in the quarter, while management said that the outlook for central bank policy rate increases led by the Bank of England from the second half of 2022 had "improved.
On the flip-side, "key downside risks are competitive dynamics in key markets, and geopolitical risks to which the stock has been sensitive to."
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