Broker tips: JD Sports, NatWest

29th Apr 2024 15:51

(Sharecast News) - Barclays downgraded JD Sports on Monday to 'equalweight' from 'overweight' and cut its price target for the stock to 140.0p from 165.0p after the retailer announced the acquisition of US rival Hibbett last week for $1.1bn.

JD Sports said it would pay $87.50 a share in cash for Hibbett stock.

"Companies cannot choose the perfect time to do deals, but we believe that rebuilding a track record would have been preferable before spending circa £900m on another acquisition, especially given concerns over Nike's innovation," Barclays said.

Headquartered in Birmingham, Alabama, Nasdaq-listed Hibbett has 1,169 stores in 36 states across the US trading under the Hibbett and City Gear fascias.

Analysts at Berenberg raised their target price on banking group NatWest from 325.0p to 350.0p on Monday as it said there was "no reason" for it to trade below tangible book value.

Berenberg said NatWest had broke free from the trend of falling net interest margins during Q1 and noted that while a further quarterly expansion was not guaranteed, volume and margin dynamics had strengthened and the bank was now growing faster than peers.

The German bank noted that despite these developments, NatWest's conservative guidance has not changed. Berenberg reckons that guidance to current interest rate expectations may imply £500.0m of additional revenues during FY24, leading it to now expect it to generate a sustainable return on tangible equity of roughly 13%.

"These returns are poorly reflected in the bank's valuation, trading on 0.9x TBV," said Berenberg, which reiterated its 'buy' rating on the stock.

"We see no reason for NatWest to trade below TBV, considering a c13% sustainable RoTE and c11% annual total yield. Our 350p price target for NatWest (up from 325p) values the bank at a modest premium to TBV."