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Broker Tips: Segro, Tesco, Egdon Resources, Aviva

  • Shore Capital upgrades Segro
  • WH Ireland focus on Egdon Resources
  • RBC Capital Markets raises target price for Aviva
  • Tesco downgraded by Jefferies
  • JP Morgan raises NatWest target price

Shore Capital has upgraded Segro (LON: SGRO) to ‘hold’. Segro, a UK Real Estate Investment Trust (REIT) that owns, manages and develops a portfolio of modern warehouses, datacentres and light industrial property across Europe, performed well through the pandemic, as the surge in e-commerce created demand for its warehousing, and analysts believe Segro could also weather a widely expected recession. The broker consensus is all positive: Berenberg and Citigroup both have a ‘buy’ recommendation on the stock, while Barclays and Morgan Stanley have an ‘overweight’, and RBC a ‘sector perform’. In fact, the only broker to have a ‘sell’ until last week was Shore Capital. At close of trading yesterday, the stock was priced at 924.4p, a return of -35.6 % YTD and -28.1 % over 12 months.

WH Ireland has flagged up Egdon Resources (LON: EDR), an oil and gas company with onshore assets in the UK, as a stock that could benefit from a possible decision by the UK’s new prime minister Liz Truss to lift the ban on fracking. Already, Egdon is one of the best performers on AIM this year, thanks to strengthening oil and gas prices, but it is also “one of the largest holders of onshore acreage in the UK prospective for hydraulic fracking”. The broker has an 8.4p fair value estimate for Egdon Resources, which does not include any value for the company’s lands that would require fracking. At close of trading yesterday, the stock was priced at 7.6p, a return of 402.8 % YTD and 450.4 % over 12 months.

RBC Capital Markets has raised its target price on Aviva (LON: AV) more than 21% to 510p yesterday and reiterated its ‘outperform’ rating for the stock. The broker noted its strong capital generation, saying that “not only can Aviva undertake buybacks of up to £450m per annum, it can generate growth to support a long-term dividend per share compound annual growth rate of 4% per annum.” RBC therefore estimates a sector-leading cumulative total capital return yield of 33% over 2022-24. At close of trading yesterday, the stock was priced at 436p, a return of 10.7% YTD and 14.4% over 12 months.

Jefferies has downgraded Tesco (LON: TSCO) to ‘hold’ (buy), cutting the target price by more than a quarter to 260p (350p) on fears that the cost-of-living crisis is going to see consumers cut their spending. Jefferies’ pessimism applies to much of the retail sector, meting out the same downgrades to Sainsbury’s (‘hold’, 210p), Kingfisher (‘hold’, 240p), B&M European Value Retail (‘underperform’, 300p), Marks & Spencer (‘hold’, 115p) and AB Foods (‘hold’, 1,500p). At close of trading yesterday, the stock was priced at 255.9p, a return of -11.7% YTD and -0.6% over 12 months.

JP Morgan, meanwhile, has taken a positive stance on banking stocks, raising the target price on NatWest (LON: NWG) to 330p (300p), with a ‘neutral’ recommendation, as a stock that would benefit from higher UK policy rates, robust mortgage lending and credit card lending. NatWest also surprised analysts and shareholders with better-than-expected interims and a commitment to hand back £2.2bn to investors. JP Morgan also upped the target price on Lloyds Banking (64p, ‘overweight’), Standard Chartered (770p, ‘overweight’), HSBC (590p, ‘neutral’) and Barclays (200p, ‘neutral’). At close of trading yesterday, NatWest shares were priced at 255p, a return of 4.9%YTD and 10.0% 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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