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FTSE 100 at the close: RS Group, British American Tobacco


By Patrick Munnelly, Market Strategist, Tickmill

UK stocks have ended the week in the red, with the FTSE 100 index shedding 0.65% on Friday.

The decline was primarily led by mining companies with Antofagasta [LON:ANTO] down 3.3%, on concerns surrounding a bleak demand outlook in China.

Additionally, data indicated that retail sales within the domestic market had fallen more than anticipated during the month of July.

These market movements illustrate the intricate interplay of both global and domestic economic indicators impacting investor sentiment and market trends right now.

FTSE 100 biggest movers

Shares of RS Group [LON:RS1] saw a decline of 3.52% by the close.

This performance positioned the stock as one of the biggest losers in the Index today, while the stock has now reached its lowest point since October 30, 2020.

The sell-off came as brokerage firm UBS downgraded RS Group’s stock from “buy” to “neutral” and lowered its price target (PT) from 1250p to 800p. This downgrade has been influenced by UBS’s projection of a more substantial “unwind” in the company’s profits. Recent data indicates weakening markets and a reversal of share gains, contributing to this assessment. UBS foresees a period marked by sustained negative organic growth and margin pressure for the company.

The broker also anticipates a significant drop in gross margin in the near term, as the inflation-driven gains on inventory recede. The stock’s year-to-date decline stands at 22.88% as of the previous close, highlighting the challenges faced by the company in the current market environment. The impact of UBS’s downgrade combined with broader market sentiment has contributed to the decline.

On the positive side of the ledger, British American Tobacco [LON:BATS] sat at the top of the blue chip index, gaining 1.53% on the session.

The stock is currently trading at historically low levels, with several key indicators highlighting its undervaluation. The company’s price-to-earnings (P/E) ratio is at its lowest point in 23 years, suggesting that the stock is relatively inexpensive compared to its earnings. Additionally, the company’s dividend yield, which represents the dividend income relative to its stock price, is also at its highest level in 23 years, making it an attractive option for investors seeking income. Moreover, BAT’s stock is trading at a historical discount of 52%, meaning that its current price is significantly lower than its average historical valuation.

This substantial discount has attracted bargain hunters seeking out undervalued stocks with the expectation that their prices will eventually rise to reflect their true worth. These investors see potential for the stock’s value to increase over time, prompting them to acquire shares at the current lower price.

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

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