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Broker Tips: Playtech, Legal & General, Hikma Pharmaceuticals

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  • Deutsche Bank upgrades Playtech
  • JP Morgan Cazenove upgrades Legal & General Group
  • Berenberg Bank reiterates Oxford Nanopore Technologies rating
  • Hikma Pharmaceuticals downgraded by Barclays
  • JP Morgan Cazenove downgrades Phoenix Group

Deutsche Bank has upgraded online gambling and sports betting supplier Playtech (LON: PTEC) to ‘buy’ (hold) and dropped the target price to 602p (693p), on the basis that the stock is undervalued. Deutsche says Playtech is trading 30% below the rejected 680p cash offer from Australian slot manufacturer Aristocrat, adding that “we see upside from a wholesale restructuring of the business either by its own management, or a third party”. Playtech has been considering options to maximize shareholder value, including breaking up its B2B and B2C businesses to find new buyers. Some shareholders have already made offers. At close of trading yesterday, the stock was priced at 462p, with a return of -36.3% YTD and 20.1% over 12 months.

JP Morgan Cazenove has upgraded Legal & General Group (LON: LGEN) to ‘overweight’, upping the target price to 365p (325p). In its half year results, the group said operating profits and earnings were both up 8% on last year, cash generation was up 22%, capital generation was up 14%, and that it remains on track to generate £8bn to £9bn of cash and capital from 2020 to 2024. The strong performance was mostly due to an improving rates environment and strong performances across almost all divisions. At close of trading yesterday, the stock was priced at 270p, with a return of -9.4% YTD and -2.5% over 12 months.

Berenberg Bank has reiterated its ‘buy’ recommendation for genome sequencing company Oxford Nanopore Technologies (LON: ONT) and maintained its target price at 671p. RBC rates the stock as an ‘outperform’, with a target price of 400p. Oxford Nanopore listed in September last year and is not yet profitable, but hopes to break even by 2026. Its aim is to disrupt the sequencing market with technology that has applications not just in healthcare but also in agriculture, industry and education. At close of trading yesterday, the stock was priced at 304.5p, with a return of -56.5% YTD.

Barclays has downgraded Hikma Pharmaceuticals (LON: HIK) to ‘equal-weight’ (overweight), dropping its target price to 1,750p (2,250p). In May, JP Morgan Cazenove downgraded the stock to ‘neutral’, slashing the target price some 34%, to 2,900p. In its half year results, Hikma reported that group revenue was flat year-on-year, operating profit was down 27%, cashflow was down 25% and earnings were down 29%. The poor performance was in particular due to the highly competitive market in the US, where its Generics business suffered, and to delays in getting its recent launches to market. At close of trading yesterday, the stock was priced at 1,594p, with a return of -27.9% YTD and -34.6% over 12 months.

JP Morgan Cazenove has downgraded Phoenix Group (LON: PHNX) to ‘neutral’, dropping the target price to 775p (800p), after the group announced a cash funded acquisition of Sun Life UK for £248m. Phoenix, a UK closed life assurance fund consolidator, said the acquisition is expected to deliver c.£470m of incremental long-term cash generation, with approximately 30% of this cash generation to emerge in the first three years. The company expects that the value and cash flow generated from the deal will enable a sustainable 2.5% inorganic rise in the company’s dividend, taking effect from the final 2022 payment subject to completion. Last month, Barclays reiterated its ‘overweight’ recommendation, with a target price of 780p. At close of trading yesterday, the stock was priced at 660p, with a return of 1.1% YTD and -4.9% over 12 months.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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