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Tech Capital

Broker spotlight: HSBC, Apple, Shell, Providence Resources, Statpro...


Someone likes HSBC (LON:HSBA) and its heavyweight broker Goldman Sachs after the share price slide recently following numerous scandals. 

‘Buy’ (from ‘neutral’) is the new stance and based on three points: The recent de-rating; HSBC’s position as a key beneficiary of recent US$ rate moves; and the opportunity to eject the lower profit areas of its footprint.

Wm Morrison (LON:MRW) is another laggard benefiting from an upgrade with JP Morgan now rating as the supermarket as a ‘neutral’ rather than ‘underweight’.

A combination of new management, improved trading and greater cost cutting opportunities, a stronger balance sheet and less demanding valuation compared to the other grocers has prompted a substantial increase in the target price to 225p (135p).

Apple (NASDAQ:APPL) is still rated a ‘buy’ at UBS even though the broker seemed unimpressed with the Apple Watch.

Although management again highlighted various applications, most emphasise improved convenience over pulling the phone out—there still is not a sense of a killer app, said the broker.

Pricing was as expected for the low-end Sport, a bit lower for the Watch, and high at $10,000-17,000 for the Edition. 

Indeed, UBS said the most impressive announcement was the new 12" Retina MacBook for $1,299. 

On the other side, there was plenty of red ink today starting with Anglo Dutch oil giant Royal Dutch Shell, where UBS has cut its view to ‘neutral’ from ‘buy’.

Though 15% lower in US$ terms in the past 12 months, this is better than the sector overall and the shares offer now less relative value

“We were disappointed with response to challenging operating conditions” added UBS.

“Our concern is Shell looks behind the curve given vigorous responses elsewhere that likely mean the relative robustness of its earnings/cashflows/balance sheet isn't so clear cut. 

“The re-introduction of the scrip dividend option suggests the Board is somewhat concerned also.”

Outsourcer Capita (LON:CPI) was also feeling the red pen effect as Credit Suisse downgraded to ‘underperform’ and chopped its target price to 1080p from 1200p.

Political risks are rising ahead of the election. The policy backdrop of the last 20 years has been largely benign for the outsourcers but Credit Suisse does not think that a continuation of this environment is a foregone conclusion. 

Goldman Sachs also chopped its rating for online estate agency Rightmove 9LON:RMV) to ‘neutra’l from ‘conviction buy’ while HSBC cut ad agency WPP (LON:WPP) to ‘neutral’ from ‘overweight’.

Down a couple of divisions, Irish oil explorer Providence Resources (LON:PVR) has been upgraded to ‘buy’ from ‘neutral’ by Cantor Fitzgerald.

“The long-awaited farm-out of Providence’s key Barryroe field is reaching conclusion, hinging on the farminee raising the required funds to complete the transaction. 

“Nevertheless, the recent placing and extension to the company’s existing loan facility underlines support for the Providence story in our view.” 

The target price remains 87p compared to 24.3p in the market.

Software group StatPro (LON;SOG) said its cloud-based strategy is now being accepted by customers, which means the focus of the next few years must be on execution said Panmure Gordon.

The recent €4m strategic contract win with a major European asset manager is hopefully just the start. Buy says the broker.

© tech Capital 2019

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