The recent market correction has encouraged brokers to scout around for stocks where the price falls might have been overdone, and the following three stocks have been identified as potential candidates. Nomura Securities has upgraded tobacco giant Imperial Tobacco - popularly known as Imps – to "buy" in the belief that now the stock has dipped below 1800p there is little downside risk left.
“Although we see many of the concerns over low- to medium-term underlying profit growth (the Tobacco Wall), competition in the US, margins in the UK, plain packaging and leaf cost inflation as justified, we believe these are more than reflected in the current stock price,” says Nomura analyst David Hayes.
Hayes thinks the market will “now start to reassess upside potential for fundamental equity valuation (high cash generation/returns), even based on very cautious assumptions” while there is always the possibility of “a medium-term M&A [mergers & acquisitions] exit.”
The broker has upgraded the stock from "neutral" and has a "conservatively realistic" new price target of 2,000p, providing upside potential of 14%.
Kiddies toys and equipment retailer Mothercare has plunged to a 10-month low after falling 12% in just over a week, due in part to disappointing final results.
FinnCap believes the shares are now back to a level at which they appear oversold from a technical perspective and where it feels the fundamental attractions are undervalued.
A full-year profit of £37.2m was less than the £39m analyst David Stoddart had wanted, while a harder than expected hit to fourth quarter UK gross margin was blamed on bad weather, but net cash of £38.5m after generating a net cash inflow of about £14m will comfortably able to finance its growth strategy.
Stoddart starts coverage of the Early Learning Centre owner with a "buy" recommendation and 600p target price.
Panmure Gordon seems unperturbed by concerns that the online poker boom has faded and has started coverage of online gaming firm 888 Holdings with a recommendation to buy the shares, while KBC Peel Hunt has also turned bullish on the stock.
“The eGaming industry fundamentals remain attractive with double-digit top-line growth anticipated, along with rising barriers to success,” opines Panmure Gordon.
The stock trades at around a 19% price/earnings (PE) ratio discount to its peers, and the broker believes much of this discount is unwarranted. “We initiate coverage with a Buy recommendation and 100p price target, implying 45% upside potential,” the broker concludes.
KBC Peel Hunt is another that feels that the discount is unwarranted and that the correction since the recent underwhelming trading update has been overdone.
“The 888 shareprice
has declined by over 40% since January, with much of this occurring post the disappointing Q2 update. Current trading is undoubtedly challenging during what is a seasonally weak period and likely to be compounded at the top line by weak currencies. However, the share price decline now means the group is now trading on a prospective PE to Dec 2010 of less than 10x and presents a 35% upside to our fair value of 98p,” KBC analyst Nick Batram.
KBC has shifted its stance on the stock from “hold” to “buy”.
Hayes thinks the market will “now start to reassess upside potential for fundamental equity valuation (high cash generation/returns), even based on very cautious assumptions” while there is always the possibility of “a medium-term M&A [mergers & acquisitions] exit.”
The broker has upgraded the stock from "neutral" and has a "conservatively realistic" new price target of 2,000p, providing upside potential of 14%.
Kiddies toys and equipment retailer Mothercare has plunged to a 10-month low after falling 12% in just over a week, due in part to disappointing final results.
FinnCap believes the shares are now back to a level at which they appear oversold from a technical perspective and where it feels the fundamental attractions are undervalued.
A full-year profit of £37.2m was less than the £39m analyst David Stoddart had wanted, while a harder than expected hit to fourth quarter UK gross margin was blamed on bad weather, but net cash of £38.5m after generating a net cash inflow of about £14m will comfortably able to finance its growth strategy.
Stoddart starts coverage of the Early Learning Centre owner with a "buy" recommendation and 600p target price.
Panmure Gordon seems unperturbed by concerns that the online poker boom has faded and has started coverage of online gaming firm 888 Holdings with a recommendation to buy the shares, while KBC Peel Hunt has also turned bullish on the stock.“The eGaming industry fundamentals remain attractive with double-digit top-line growth anticipated, along with rising barriers to success,” opines Panmure Gordon.
The stock trades at around a 19% price/earnings (PE) ratio discount to its peers, and the broker believes much of this discount is unwarranted. “We initiate coverage with a Buy recommendation and 100p price target, implying 45% upside potential,” the broker concludes.
KBC Peel Hunt is another that feels that the discount is unwarranted and that the correction since the recent underwhelming trading update has been overdone.
“The 888 share
KBC has shifted its stance on the stock from “hold” to “buy”.
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