Broker tips: Carnival, Easyjet, Ted Baker

Alexander Bueso WebFG News | 06 Dec, 2017 20:13 - Updated: 20:13 | | |

Ted Baker fashion

Analysts at Morgan Stanley have upgraded their recommendation on cruise ship operator Carnival on the back of strong demand signals.

Looking to the long-term, the broker was still worried about potential overcapacity in the cruise industry.

"A lot is riding on China being able to absorb much of the industry order book," the broker said.

More specifically, Morgan Stanley explained how the industry's order book had reached a record 235,000 berths, for supply growth of 45% out to 2025.

Net of scrappage, that would equate to a roughly 6% compound annual rate of growth between 2017 and 2021.

Hence, for the industry to sustain yield growth of between 2% and 3%, demand would need to rise by between 8% and 9% annually.

"[Maintaining that rate] for four consecutive years seems optimistic and is much more than historical levels (6% demand, 1% yield, 5% capacity)," the analysts wrote in a research note sent to clients.

Yet in 2017 stronger demand had outweighed record supply growth and a qualitative survey of US travel agents conducted by Morgan Stanley pointed to strong demand for cruises in November.

Indeed, tax reform in the States might be set to further boost consumer income and confidence and a stockmarket at records was also helping, the broker added.

JPMorgan Cazenove upgraded EasyJet to 'overweight' from 'underweight' and lifted the price target to 1,550p from 1,330p as it incorporates the acquired Air Berlin slots.

The bank pointed to a "much improved" FY18 pricing outlook and estimated profit contributions from FY19 onward related to the slots EasyJet is taking over from Air Berlin.

"There is no change to our standing concerns around Brexit-related uncertainty given EZJ’s outsized exposure to UK point-of-sale. However, we believe the market is more likely to refocus on these risks after the summer peak season," JPM said.

The bank projects a swing from the guided £60m FY18 Air Berlin pre-tax loss to a profit of £36m in FY19, largely owed to growth and load factor improvement more than offsetting a projected fare headwind of around 2%.

Ted Baker's valuation was up with events, Barclays's analysts said, initiating their coverage at 'equalweight' despite the company's multiple attractions.

Amongst the latter, the fashion retailer had a strong growth profile, a rational store estate, had been investing heavily in its digital footprint and cash flow was expected to be less lumpy going forward.

The latter was true even under "fairly conservative" assumptions, they said.

Nevertheless, at its current price the stock was discounting free cash flow growth of approximately 58% or about 7% a year over the next decade.

On top of that, Barclays voiced concern regarding the increased proportion of gross brand sales coming from wholesale and licensing, which it said might pose a risk to the value of the brand.

Long lead time could also make it harder for the brand to maintain fashion credibility, Barclays said.

Barclays set a 2,700p target price.

More news

17:53 London close: Forties failure lifts FTSE as inflation spikes

London stocks extended their gains on Tuesday as supply disruptions boosted the energy sector and investors mulled higher than expected UK inflation figures.

17:33 US open: Boeing, 3M push Dow Industrials to fresh record-high

Wall Street's main indices are again heading higher on Tuesday as the Federal Reserve kicks off its two-day rate-setting meeting and several positive updates from corporate heavyweights such as Boeing and 3M.

17:34 EasyJet acquisition of Air Berlin assets approved by European Commission

UK budget airline easyJet cleared a major regulatory hurdle on Tuesday as its proposed acquisition of airport slots and aircraft from Air Berlin was approved by the European Commission.

17:49 Facebook to overhaul its tax structure worldwide

Facebook will move its global tax and revenue base from Ireland and begin booking advertising locally in every country where it operates.

16:51 GSK given green light for Churg-Strauss syndrome treatment

GlaxoSmithKline has been given approval by the US drug regulator for a first targeted treatment for eosinophilic granulomatosis with polyangiitis (EGPA), previously known as Churg-Strauss syndrome.

16:44 Trump accuses Democrats of plot after sexual harassment claims

US President Donald Trump has claimed Democrats are behind a series of sexual harassment claims made against him this week.

16:41 Trump vows to send American astronauts to the moon

Donald Trump, the President of the United states signed the Space Policy Directive 1 to send astronauts to the moon again and to Mars for the first time in history.

16:33 Goldman Sachs keeps Barclays and Lloyds at 'sell'

Goldman Sachs reiterated its 'sell' recommendation on shares of Lloyds and Barclays, placing both stocks on its list of 'UK Sell Ideas' for 2018.

16:27 EU Brexit negotiator says David Davis comments 'undermine trust'

Brexit secretary David Davis’ claim that the deal agreed by the UK and European Union last week is not binding has been branded “unacceptable” by bloc negotiator Guy Verhofstadt, who added that it “undermines trust” between the two teams.

16:23 GlaxoSmithKline upbeat on 'promising' data from Dreamm-1 blood cancer study

GlaxoSmithKline has presented promising new data from the dose expansion phase of the Dreamm-1 study of GSK2857916, an anti-B-cell maturation antigen (BCMA) antibody-drug conjugate to treat blood cancer.