- RBC Capital upgrades Severn Trent
- RBC Capital upgrades Pennon Group
- Jefferies upgrades Hargreaves Lansdown
- ODDO BHF raises Vodafone to ‘outperform’
- Citigroup upgrades National Grid to ‘neutral’
RBC Capital has upgraded Severn Trent (LON: SVT) to ‘outperform’ (sector perform), and trimmed the target price slightly to 2,900p (2,950p). The upgrade comes after the share price tumbled more than 22% in six weeks, before recovering slightly last week. RBC said the sell-off was unjustified, given the strong inflation tailwinds, and at current levels the stock offers material upside. Severn has shown strong growth, impressive environmental credentials and a strong focus on outcome delivery incentives. At close of trading yesterday, the stock was priced at 2,369p, a return of -18.1% YTD and -8.8% over 12 months.
RBC Capital also upgraded Severn Trent’s rival Pennon Group (LON: PNN) to ‘outperform’ (sector perform) but lowered the target price to 975p (1,050p). The bank sees significant value in the stock, saying “the valuation looks too cheap to ignore”, despite the water regulator Ofwat opening an investigation into possible violations of rules on wastewater treatment. RBC notes that Pennon has been consistently the top performer in the water sector on returns so far, and that this is unlikely to change. At close of trading yesterday, the stock was priced at 798.5p, a return of -31.3% YTD and -29.4% over 12 months.
Jefferies has upgraded Hargreaves Lansdown (LON: HL) to ‘hold’ (underperform), and raised the target price substantially to 930p (800p). The broker said that the platform’s quarterly valuation was better than expected, thanks to the weighting to US equities and the weak pound, and raised its estimate for the revenue margin on cash. The broker said: “there may be some challenges ahead, but this is a good and highly profitable business”. The broker also upgraded HL’s rival AJ Bell (LON: AJB) to ‘hold’ (underperform) and increased target price of 250p (220p), as the stock was down this year while interest rates have risen. The broker said that AJ Bell is “well-led, following recent changes”. At close of trading yesterday, Hargreaves Lansdown stock was priced at 907.4p, a return of -32.3% YTD and -35.5% over 12 months.
ODDO BHF raised Vodafone (LON: VOD) to ‘outperform’ (neutral), with a marginal increase in the price target to 142p (140p). Vodafone is currently in talks with CK Hutchinson, which owns Three UK, to merge their UK businesses and create a market-leading mobile network that could compete with the biggest players, roll-out 5G services and expand broadband availability. Analysts say the merger, which would give Vodafone a 51% controlling stake, is now likely. Vodafone is also looking to sell a stake in its fixed network in Spain, after recently buying cable operator Nowo in Portugal. Broker sentiment has slipped over the past six months, with 10 on ‘buy’ and 10 on ‘neutral’. At close of trading yesterday, the stock was priced at 102.6p, a return of -6.8% YTD and -8.1% over 12 months.
Citigroup has upgraded National Grid (LON: NG) to ‘neutral’ (sell) and lowered the target price to 921p (998p). National Grid is aiming to sell a 60% interest in its gas transmission and gas metering business, worth £2.2bn, though this has yet to be approved by the UK’s markets regulator. National Grid last year bought power-distribution company Western Power Distribution for £7.8bn as part of a strategy to focus on electricity, rather than gas. The regulator must make an initial decision by 22 November. The broker consensus has deteriorated slightly over the past six months and is now firmly neutral. At close of trading yesterday, the stock was priced at 924.8p, a return of -12.1% YTD and 2.3% over 12 months.
