Date: Tuesday 13 Jul 2010
The sales update from Burberry on Tuesday was ahead of market expectations and though the near term trading outlook for the luxury goods maker is uncertain given the spell of belt tightening the government wants us to perform, Charles Stanley still thinks the shares are worth accumulating on any dips in the share price.“Outlook comments were upbeat. Management considers the group to have had a strong start to the year and believes that the Burberry brand has such momentum that it should continue to outperform irrespective of the economic backdrop,” notes Charles Stanley analyst Sam Hart.
The broker’s “best guess” regarding demand for the company’s goods is that it will hold up relatively well and should continue to slowly recover from the depressed levels of 2009.
The broker is leaving its full year earnings forecasts unchanged for now but likes the long term prospects for the good.
“We believe luxury goods remain a structural growth market, driven by rising disposable incomes in emerging markets, the growing number of high net worth individuals, more aspirational consumers, increasing spending power of working women and a growing propensity to travel,” Hart states.
“Following strong recent performance the valuation looks well up with events, but we would add to holdings on any signs of sustained profit taking. The recommendation remains Accumulate,” the broker concluded.
Impending public sector spending cuts have made many investors wary of business process outsourcing companies but Panmure Gordon has taken a contrarian view with Capita, one of the biggest operators in the sector and upgraded its recommendation on the stock.
“While we acknowledge that the timing of big-ticket spend within central government (10% of revenues) remains uncertain in the near term, the business process outsourcing (BPO) market elsewhere has not gone away. Indeed, the private sector is now showing signs of recovery, with ‘decision-making paralysis’ potentially easing,” the broker suggests.
Ahead of the company’s interim results on 22 July Panmure Gordon has bumped up its price target for Capita from 750p to 885p and that has prompted a change in recommendation from “hold” to “buy”.“We are raising our target price on conviction that organic growth profile will improve from here,” the broker said.
No comments:
Post a Comment