Proactive Investors -
- FTSE 100 down 22 points at 7,664
- Sainsbury falls after mixed Christmas trading
- Greggs (LON:GRG) and Persimmon (LON:PSN) rise after updates
Persimmon in demand as sales top guidance
Shares in Persimmon remain in demand, up 3.7%, after today’s update.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown (LON:HRGV) highlighted new home completions came in ahead of group expectations in 2023 although lower volumes overall mean there’s much “less cash coming in the door.”
He pointed out in a bid to keep the cash coffers in reasonable shape, investment in new land has been reigned right back, something he expects to continue in the near term, given the group’s healthy land bank.
He pointed out that market forecasts are suggesting a 35% fall in revenue for 2023 which while not ideal, is a picture that’s largely being repeated across the sector.
“Investors need to keep in mind that housebuilders are cyclical businesses that go through periods of ups and downs,” he explained.
Nonetheless, he thinks the near-term outlook “remains challenging, and it could be a while before we see a step change improvement in buyer confidence across the housing market.”
Marks Electrical plunges after margin warning
Away from the big caps and shares in Marks Electrical have plunged 24% as it warned of pressure on margins despite double-digit sales growth.
The electrical retailer said in the nine months to December 31, revenue rose 22% year-on-year to £88.9 million.
But, its gross margin did not see the rise it had expected, due to "a challenging trading environment where consumers remain highly price conscious", despite controlling other costs.
The firm warned this will have a knock-on effect on its annual earnings.
Shore Capital noted the new guidance was more than 30% below consensus EBITDA, at the mid-point.
It has slashed its adjusted EBITDA forecast for financial 2024 and 2025 by 31% and 29% respectively.
Wise offers 32% upside, says Berenberg
Another share getting a boost from positive broker comments is Wise Group, up 2.2%, after Berenberg initiated coverage with a ‘buy’ rating and an 1,140p price target, offering 32% upside.
The bank thinks Wise’s “superior economic model and sharing of scale economies with customers are entrenching its competitive advantages.”
Ancillary income, such as the net interest income generated on customer balances, provides additional upside to consensus estimates, it reckons.
Further, the expensed infrastructure build-out is concealing significantly higher underlying profitability and/or a meaningfully improved ability to lower prices.
IWG boosted by RBC upgrade
RBC has also upgraded IWG helping shares up 3.7%, to ‘outperform’ from ‘sector perform’.
"Whilst IWG is a somewhat risky investment given the macro sensitivity and inherent operational leverage, we think it warrants a revisit", the broker said.
“IWG (LON:IWG) should benefit from better disclosure, lower capital intensity and WeWork's demise,” it reckons.
“All in all we think risk reward is in favour but not one for the faint-hearted,”it said, setting a 215p price target.