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Broker Tips: Metro Bank, Kosmos Energy, Harbour Energy

  • Investec upgrades Metro Bank
  • Berenberg positive on Kosmos Energy
  • Barclays raises Harbour Energy target price
  • JPMorgan Cazenove downgrades InterContinental Hotels Group
  • Shore Capital upgrades Marshalls

Investec has upgraded Metro Bank (LON: MTRO) to ‘buy’ (hold), raising the target price to 95p (90p). Although the bank is making progress with its turnaround – reporting record revenue growth and a cut in pre-tax losses in the first quarter of this year, with the expectation of reaching monthly breakeven by 1Q 2023 – clearly for the analysts that progress is slow. For non-executive director Nicholas Winsor, however, the upgrade was reason enough to buy 50,000 shares the next day at 82p, for £41,055. At close of trading yesterday, the stock was priced at 83.1p, a return of -13.5% YTD and -18.8% over 12 months.

Berenberg Bank has resumed its long-held positive stance on Kosmos Energy (LON, NYSE: KOS) by returning the stock to ‘buy’, raising the target price to 710p (670p). Barclays is similarly positive, with an ‘overweight’ rating on the stock. Earlier this month, Kosmos reported ‘a strong operational and financial performance’, with the expectation of a full year of free cash flow generation and debt reduction in line with previous guidance. Kosmos is well-placed to meet the increased demand for oil and gas, as countries look to diversify their current supply sources. At close of trading yesterday, the stock was priced at 640p, a return of 154.0% YTD and 302.8% over 12 months.

Barclays raised its Harbour Energy (LON: HBR) target price 32% to 715p (540p) and kept its long-held ‘overweight’ rating, reflecting clear upside potential. Jefferies also raised its Harbour Energy target price 22% to 600p (490p), with a ‘buy’ rating. In its half-year results, Harbour Energy reported a 40% increase in production, a 5% reduction in unit operating costs, a profit after tax of £842m and free cash flow of £1.2bn after tax. Just their Tolmount project in the North Sea – brought onstream in April – has increased UK domestic natural gas supply by over 5%. The share price has gained more than 50% over the past two months, pushing the stock price at close of trading yesterday to 470.8p, a return of 35.9% YTD and 30.3% over 12 months.

JPMorgan Cazenove has downgraded its recommendation on InterContinental Hotels Group (LON: IHG) to ‘neutral’ (overweight), dropping the target price to 5,900p (6,100p). Shore Capital also downgraded the stock to ‘neutral’, while Barclays and RBC maintained their ‘overweight’ ratings, with target prices unchanged at 5,400p and 6,100p respectively. JPM pointed to “clear uncertainty around the direction of revenue per available room into the winter” and to fears about consumers cutting their discretionary spending. Earlier this month, IHG reported that a recovery in demand and pricing led to group profit more than doubling versus 2021. At close of trading yesterday, the stock was priced at 4,685, a return of -1.39% YTD and 2.47% over 12 months.

Shore Capital upgraded the construction firm Marshalls (LON: MSLH) to ‘buy’ (hold), with a target price of 535p. Marshalls earlier in its interims had reported a 17% increase in revenue, boosted by its acquisition in April of pitched roofing systems supplier Marley. In May, Deutsche downgraded the stock to ‘hold’ and cut the target price almost 30% to 629p on fears of “a more uncertain economic backdrop”, and of reduced core business volumes due to growing pressure on discretionary spending in the current and next trading year. Last week, Berenberg also downgraded the stock to ‘hold’, and cut the target price 35% to 400p. At close of trading yesterday, the stock was priced at 340.8p, a return of -50.8% YTD and -57.5% over 12 months.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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