AstraZeneca (AZN)

Source: CMC Markets, 10 October 2018

Shares of international pharmaceutical giant AstraZeneca have been on a multi-year uptrend and are currently trading within close distance of record highs. Shares are just 6.6% away from all-time highs, bouncing over 25% from 2018 lows; +11.8% year-to-date.

Brokers are overwhelmingly bullish on AstraZeneca, with 85% of analysts saying either “Buy” or “Hold”, which is further amplified by a significant 68% of brokers seeing an upside for the share price in the medium turn to the average of 6179p.

Analysts at Barclays see (10 Oct) a positive quarter from AstraZeneca, helped by strong oncology sales trends, with results of the Solo-1 trial of cancer drug Lynparza (to be announced at an upcoming European Society for Medical Oncology conference) serving as a potential positive catalyst.

Will AstraZeneca return to August highs of 6122p (+6.7%) or fall to the July low of 5111p (-10.9%)?

Broker Consensus: 62.5% Buy, 22% Hold, 15.6% Sell
Bullish: Société Générale, Buy, Target 8400p, +47% (9 Oct 18)

Average Target: 6179p, +8% (10 Oct 18)

Bearish: Goldman Sachs, Sell/Neutral, Target 4080p, -29% (1 Aug 18)

Pricing data sourced from Bloomberg on 10 October 2018. Please contact us for a full, up to date rundown.

Evraz (EVR)

Source: CMC Markets, 10 October 2018

Russia- and US-focused steelmaker Evraz has been benefiting from the recent rise in commodity prices. Latest strong Chinese economic data has helped the shares extend their 3-year uptrend to new record highs. China’s industrial production rose 6.1% in September, beating market consensus of 6%, while retail sales also topped forecasts. With China being one of the most important global producers and consumers of commodities, companies like Evraz have benefited from positive macroeconomic data. (Source: Dow Jones)

The steelmaking giant has also benefited from exposure to the North American market, which shielded it from some of President Trump’s EU steel tariffs. With Canada now joining US and Mexico in a new free trade association (USMCA), Evraz shares could gain further momentum thanks to operating steel mills in Canada.

The shares are within just 4.2% of 2018 highs, +70.9% from 2018 lows and +61.3% year-to-date.

Will Evraz move beyond new record highs of 600p (+9%) or fall to August low of 458p (-16.7%)?

Broker Consensus: 23.1% Buy, 53.8% Hold, 23.1% Sell
Bullish: Renaissance Capital, Buy, Target 610p, +9% (8 Oct 18)

Average Target: 493.09p, -12% (10 Oct 18)

Bearish: Alfa-Bank, Overweight, Target 420p, -25% (9 Oct 18)

Pricing data sourced from Bloomberg on 10 October 2018. Please contact us for a full, up to date rundown.

easyJet (EZJ)

Source: CMC Markets, 10 October 2018

European low-cost airline easyJet shares have struggled over the summer period thanks to the sustained rise in energy prices, with Brent Crude oil trading over $84/barrel (4-year highs). That said, easyJet has already hedged 52% of its 2019 fuel requirements at $538/tonne, while the average cost of European jet fuel stood at $724/tonne at the end of September, limiting the carrier’s exposure to rising prices. (Sources: Reuters, IATA)

Brokers are biased to the positive on easyJet shares, with only 2 brokers recommending to “Sell”, with 14 other brokerages (50% of analysts polled by Bloomberg) still advocate to “Buy” easyJet stock. An overwhelming 95% of brokers believe the share price has significant upside, with the market consensus holding for an average 1610p target price. Despite revenue headwinds and rising fuel costs, analysts at broker Liberum still see easyJet as a “long-term winner” (8 Oct), reaffirming a “Hold” rating in its latest update.

Will easyJet return to recent highs of 1620p (+35%) or fall to the Feb 2017 low of 907p (-24.4%)?

Broker Consensus: 50% Buy, 42.9% Hold, 7.1% Sell
Bullish: Exane BNP Paribas, Outperform, Target 2000p, +64% (10 Aug 18)

Average Target: 1610.15p, +32% (10 Oct 18)

Bearish: Berenberg, Sell, Target 1215p, 0% (28 Sept 18)

Pricing data sourced from Bloomberg on 10 October 2018. Please contact us for a full, up to date rundown.

London Stock Exchange (LSE)

Source: CMC Markets, 10 October 2018

Shares of the London’s premier financial market have been under pressure recently after analysts at European bank UBS noted (13 Sept) that the London Stock Exchange could lose a quarter of its euro-denominated clearing market to continental rival Deutsche Börse after UK’s exit from common European market. Following the news, London Stock Exchange stock has fallen 11.2% in past 3 weeks. Shares are down 9.5% from 2018 highs, +20.6% from 2018 lows, +11.4% year-to-date.

The exchange has been a subject of takeover rumours, with analysts at Berenberg (20 Sept) saying that LSE-ICE merger could generate $945m in synergies for shareholders, while a similar LSE-CME deal could offer up to $492m in synergies. Moving into Q4, LSE shares could benefit from news of a final Brexit agreement, with the market hopeful for a deal that avoids major fragmentation of the European financial services sector.

Will LSE return to September highs of 4814p (+13.7%) or fall to mid-April low of 4164p (-1.6%)?

Broker Consensus: 68.8% Buy, 25% Hold, 6.3% Sell
Bullish: AlphaValue, Buy, Target 6079p, +39% (4 Oct 18)

Average Target: 4868.85p, +11% (10 Oct 18)

Bearish: HSBC, Hold, Target 4300p, -2% (7 Sept 18)

Pricing data sourced from Bloomberg on 10 October 2018. Please contact us for a full, up to date rundown.

Kingfisher (KGF)

Source: CMC Markets, 10 October 2018

Shares in DIY retail group Kingfisher are down from their summer highs after the company reported disappointing results (H1 pre-tax profits down 30%), with sales in France particularly poor. The future earnings outlook has been further clouded by soft consumer demand and struggling property market in the UK due to ongoing Brexit uncertainty. According to analysts at Moody’s (21 Sept), UK retail environment will remain very difficult overt the next 12-18 month due to subdued consumer confidence and the rise of online alternatives.

Kingfisher management appears to be reacting positively to the challenges, with brokerage Whitman Howard noting (19 Sept) that a new 5-year plan appears to be in the works within the company that could lead to new format trials and a property review to optimise loss-making spaces. Majority of brokers are bullish on Kingfisher, with 86% of analysts seeing a return to higher share price levels. (Source: Bloomberg)

Will Kingfisher return to summer highs of 319p (+21.7%) or fall to recent low of 241p (-8.7%)?

Broker Consensus: 57.9% Buy, 26.3% Hold, 15.8% Sell
Bullish: Stifel, Buy, Target 430p, +71% (19 Sept 18)

Average Target: 312.29p, +24% (10 Oct 18)

Bearish: Investec, Sell, Target 235p, -7% (8 Oct 18)

Pricing data sourced from Bloomberg on 10 October 2018. Please contact us for a full, up to date rundown.

Hargreaves Lansdown (HL)

Source: CMC Markets, 10 October 2018

Shares of Britain’s biggest retail investment platform have fallen over 16% in October following a ratings downgrade from brokerage Numis (2 Oct), which trimmed its target price to 2102p, though analysts still believe that Hargreaves presents “a structural growth story” with double-digit run rate of net inflows.

“Do-it-yourself” financial portfolio management has steadily increased in popularity in recent years and Hargreaves’ introduction of a cash savings account in September adds a lucrative and long-demanded product.  With the Bank of England restarting its interest rates hiking cycle, returns on savings accounts are starting to accelerate and demand for user-friendly savings products is projected to increase. (Source: FT)

Resolution of persistent Brexit uncertainty and clarity regarding state of post-Brexit financial services market could also help shares regain their strong positive momentum seen during the summer months.

Will Hargreaves return to recent highs of 2280p (+16.8%) or fall to the May low of 1903p (-2.7%)?

Broker Consensus: 6.7% Buy, 46.7% Hold, 46.7% Sell
Bullish: Barclays, Overweight, Target 2200p, +7% (8 Aug 18)

Average Target: 1807.25, -12% (10 Oct 18)

Bearish: Jefferies, Underperform, Target 1650p, -19% (8 Oct 18)

Pricing data sourced from Bloomberg on 10 October 2018. Please contact us for a full, up to date rundown.

Next (NXT)

Source: CMC Markets, 10 October 2018

Fashion retailer Next’s shares may be down from their June highs, when warm weather and the World Cup excitement lifted the spirits (and shares) of UK high street, but the latest half-year results (25 Sept) have helped the company’s stock rebound 8.4% from recent lows.

In its latest report, the retailer brought smiles to shareholders by raising its full-year pre-tax profit guidance. The company was also candid about the potential pitfalls facing the UK retail sector, reassuring investors that the management had a firm hand of the market’s pulse and is ready to respond to challenges facing the high street.

The company recently issued a statement (25 Sept), detailing its plans for the Brexit transition and its impact on prices and earnings, calming many investors. With many of Next’s top competitors facing severe problems (e.g. Debenhams, John Lewis), Next stands out as a potential sector bright spot going into Q4.

Will Next return to June highs of 6224p (+12.8%) or fall to the September low of 5087p (-7.7%)?

Broker Consensus: 22.7% Buy, 54.5% Hold, 22.7% Sell
Bullish: RBC Capital Markets, Outperform, Target 6700p, +23% (2 Oct 18)

Average Target: 5485.41p, +0.5% (10 Oct 18)

Bearish: Whitman Howard, Sell, Target 3700p, -32.3% (10 Apr 18)

Pricing data sourced from Bloomberg on 10 October 2018. Please contact us for a full, up to date rundown.

SSE (SSE)

Source: CMC Markets, 10 October 2018

Energy utility SSE has recently received a final regulatory approval for a merger with rival Npower, reducing the number of so-called “Big Six” energy providers to just five and reducing competitive pressure on the company. Besides investing in traditional sources of energy, SSE has also been active in diversifying its portfolio with a recent acquisition of offshore wind power provider Seagreen for £118m. (Source: FT)

Steady investment in growth assets, while at the same time maintaining a healthy 8.58% dividend yield, could help SSE shares withstand the downward pressure of a recent profits warning (unusually warm weather this summer and growing gas prices led to a reduction in energy consumption). That said, shares have already recovered over 5% from profits-warning lows and investments in infrastructure could help SSE shares in the upcoming quarter’s colder months which are forecast to see higher energy consumption.

Will SSE return to May highs of 1449p (+27.1%) or fall to the recent low of 1078p (-5.4%)?

Broker Consensus: 66.7% Buy, 33.3% Hold, 0% Sell
Bullish: Exane BNP Paribas, Outperform, Target 1650p, +45.9% (1 Oct 18)

Average Target: 1373p, +21.4% (10 Oct 18)

Bearish: Day by Day, Sell, Target 952p, -15.8% (8 Oct 18)

Pricing data sourced from Bloomberg on 10 October 2018. Please contact us for a full, up to date rundown.

Sainsbury (SBRY)

Source: CMC Markets, 10 October 2018

Popular supermarket chain Sainsbury has been in negotiations this year for a merger with the Walmart-owned grocery chain Asda. While the merger is now facing scrutiny from the CMA competition watchdog, should the tie-up be successful, it would significant lessen competitive pressure on Sainsbury at the national level.

CMA has recently referred the Sainsbury/Asda merger for an in-depth investigation, precipitating the latest sell-off of the shares, which are now almost 10% below their August highs. The £7.3bn merger would create Britain’s largest supermarket chain and both companies have asked the regulator for a “fast-track” process. If approved, the shares have a strong potential for a rebound to recent highs. (Source: DowJones)

Brokers are cautious about Sainsbury shares, but biased toward a more positive outlook, with almost 79% of analysts saying either “Buy” or “Hold” and only 4 analysts saying “Sell”.

Will Sainsbury return to recent highs of 341p (+9.6%) or fall to the low of 294p (-5.4%)?

Broker Consensus: 36.8% Buy, 42.1% Hold, 21.1% Sell
Bullish: Barclays, Overweight, Target 375p, +19.4% (4 Jul 18)

Average Target: 332.38p, +5.9% (10 Oct 18)

Bearish: Goldman Sachs, Sell/Neutral, Target 231p, -26.4% (10 Jan 18)

Pricing data sourced from Bloomberg on 10 October 2018. Please contact us for a full, up to date rundown.

Vodafone (VOD)

Source: CMC Markets, 10 October 2018

Shares of telecommunications giant Vodafone have been on a prolonged downtrend this year, falling to levels last seen back in 2010. Lack of significant revenue growth in key markets has been exacerbated by a very large amount of debt (circa €40bn) that the company has taken on to finance significant mergers & acquisitions in Europe, India and Australia. Recent change of a long-term CEO is also seen a considerable risk.

Nevertheless, with the company’s shares falling to 8-year lows, Vodafone now presents a bargain opportunity and the majority of brokerages are still seeing an upside potential from current levels. While the most bullish forecasts are dated, the average target of 207p still represents a significant share price appreciation.

20 out of 24 analysts polled by Bloomberg see a share price upside over the medium-term. Broker Berenberg notes (19 Sept) that Vodafone needs more earnings momentum to “drown out risk” and the upcoming half-year report (13 Nov) presents a trading opportunity for Vodafone shares, should the results turn positive.

Will Vodafone return to July highs of 188p (+22.8%) or fall to the May 2010 low of 124p (-18.9%)?

Broker Consensus: 62.1% Buy, 20.7% Hold, 17.2% Sell
Bullish: ROE Equity Research, Buy, Target 300p, +98.7% (14 Nov 17)

Average Target: 207.8p, +37.6% (10 Oct 18)

Bearish: Macquarie, Underperform, Target 125p, -17.2% (8 Oct 18)

Pricing data sourced from Bloomberg on 10 October 2018. Please contact us for a full, up to date rundown.