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Pest control specialist Rentokil saw its shares bounce back five per cent this week after it reported a rise in group revenue and revealed a raft of cost saving measures.
In its first quarter results, revenue was up by six per cent to £634 million from £603 million a year previously. Sales had been up in both pest control and hygiene units until the last two weeks of March when coronavirus closures caused a dramatic dip. The company admitted that the pandemic is likely to have a significant impact on its performance for the second quarter and beyond.
So, could the pest control company exterminate the virus damage, or does it have tough times to come?
Rentokil’s share price has taken a hammering, falling by almost 24 per cent since the beginning of March. This week it announced it had trained 7000 staff for deep clean services to meet increased demand, taken funds from the Government’s Covid Financing Facility and drawn down £550m of its own revolving credit facility for extra liquidity.
Analysts seem heartened by Rentokil’s trading update and its cost cutting measures, with Goldman Sachs, Citigroup and Jefferies all issuing a ‘buy’ rating on the stock and Michael Hewson from CMC Markets noting that: “Rentokil appears to be one of those few companies that has been able to continue to operate through the coronavirus disruption, with pest control and hygiene designated an essential service by the government, though there has still been an element of disruption, in the last two weeks of March, due to lack of access to some of its contracts. Q1 revenues saw a rise of 7.2% to £630.5mln.”
Its company-wide cost reduction efforts are set to save Rentokil £100m in 2020 alone, and with an additional £650m cash fund available the firm seems to be in a strong position despite the disruption. The general consensus seems to be that the pest control company could weather the storm and at its current price it may be a bargain.
Global lockdown has sent streaming service Netflix’s stock soaring, as more viewers switch on while they’re stuck at home.
Its stock has hit a record high, rising another five per cent this week – now worth more than rival Disney at $439.17.
So, is now a good time to subscribe to the stock or is the streaming service’s stock getting as high as it could go?
New content, such as crime documentary Tiger King, along with old favourites like The Office have proved to be hits for Netflix through the current pandemic and the necessity to halt production means it is saving cash while it accumulates revenue. Some analysts have pointed out that this might cause problems when there is a dearth of new content in Autumn though.
The true picture will be revealed in the streaming service’s results next week, but analysts expect Netflix to announce it has added around 7.8 million new subscribers globally, up on its target of seven million.
Analysts seem optimistic that the good times could keep rolling with Pivotal Research Group raising its price target on the stock to a new high of $490. Monness, Crespi, Hardt & Co were also optimistic about the streaming services future with Brian White noting that “Even after this crisis is over, the thought of returning to a packed theater to watch a new movie release is an experience that most people are likely to avoid for the foreseeable future.”
Pharmaceutical giant, Glaxo Smith Kline saw its share price jump almost four per cent after it announced it would team up with Sanofi to develop a vaccine against coronavirus.
Using a combination of Sanofi’s antigen and GlaxoSmithKline’s pandemic adjuvant technology, the pharmaceutical partnership expects the vaccine could launch in 2021.
So, with stock now standing at 1,679.86p at the time of writing, is this a good time to buy into the pharmaceutical giant?
GlaxoSmithKline has taken a hit recently with shares down 14 per cent on this year’s peak price but many analysts think it could reach optimum health again post coronavirus.
SVB Leerink analyst Geoffrey Porges was positive about the prospects of success for the vaccine saying: “This is the first Covid vaccine collaboration that involves two major pharmaceutical companies, and we are encouraged by this joint effort as both Sanofi and GSK have strong capabilities in vaccine development, manufacturing and commercialization.”
CEO, Emma Walmsley has also revealed that the company will not profit from the vaccine while the pandemic rages on, reinvesting revenue into manufacturing instead, which should fly well in the face of public opinion.
The pharmaceutical company is in a healthy financial position anyway, with a strong dividend yield of 5.1 per cent, and the market consensus seems to be that it’s well poised to be a post pandemic survivor especially if this vaccine development goes well.
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