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Broker Tips: Rolls-Royce, Rightmove, Centrica

  • Barclays upgrades Rolls-Royce to ‘Overweight’
  • Berenberg upgrades Rightmove to ‘Buy’
  • Citi increases target price for Centrica

Barclays upgrades Rolls-Royce to ‘Overweight’

Barclays has upgraded Rolls-Royce [LON:RR.] from “Equal Weight” to “Overweight” this week and raised its target price to 270p from 239p. The upgrade was accompanied by an increase in the earnings forecast for Rolls-Royce for the fiscal years 2024 and 2025, based on strong profit margins within the civil aerospace sector.

The broker noted that “Rolls-Royce has derated ~10% in the past month (vs FTSE 100 -3%), in our view a function of de-grossing and longer cycle pressure/macro economics” presenting a “buying opportunity” ahead of the company’s 28 November capital markets day.

Rolls-Royce shares were trading at 216.4p at the time of writing, up 118% this year and 165% over the last 12 months.

Berenberg upgrades Rightmove to ‘Buy’

Berenberg has upgraded Rightmove [LON:RMV] this week to ‘Buy’ from ‘Hold’ and maintained its target price of 605p.

Rightmove shares have traded down 17% since the OnTheMarket/CoStar deal was announced on 18 October, with OnTheMarket set to be taken over by US commercial real estate information group CoStar in a £99m deal.

The bank noted that the share price drop “is an overreaction, so we upgrade our rating to a buy as we retain our conviction that Rightmove will remain the number one property portal in the UK and will be largely unaffected by the new market dynamic,” On the threat of greater competition, Berenberg commented “fears that CoStar would be able to take share away from Rightmove are overdone for three key reasons: 1) the barriers to success are high given the impact from network effects; 2) Rightmove’s ability to retain its leading position from its UK competitors; and 3) evidence of failed attempts from other international companies attempting to enter the UK portal market suggest the status quo will remain.”

Rightmove shares were trading at 468.5p today, down 10% this year and down 6% over the last 12 months.

Citi increases target price for Centrica

Citi has lifted its target price for Centrica [LON:CNA] to 180p from 155p and reiterated its ‘Buy’ rating this week. The bank noted that the FTSE 100 energy company was an attractive pick amongst its peers, with “one of the best balance sheets in the sector, delivering above sector average 8% yield via returns to shareholders (both dividends and buybacks),” Citi updated Centrica’s earnings and valuation “to reflect the secured growth in flexible generation assets, which we estimate to deliver an aggregated portfolio IRRs of circa 10% with the support of capacity market payments.”

Centrica shares were trading at 160.8p today, up 74% this year and 106% over the last 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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