Credit Suisse downgrades IWG, slashes price target after profit warning
IWG was under the cosh on Monday as Credit Suisse downgraded its stance on the stock to ‘neutral’ from ‘outperform’ and slashed the price target to 250p from 435p, removing it from its small and mid-cap Focus List following the company's profit warning last week.
FTSE 250
19,391.30
17:09 19/04/24
FTSE 350
4,341.08
17:09 19/04/24
FTSE All-Share
4,296.41
17:08 19/04/24
IWG
181.80p
16:45 19/04/24
It noted that the flexible workspace provider cut 2017 EBIT guidance to between £160m and £170m versus consensus expectations of £215m before the announcement, citing a lack of inflection in mature like-for-like revenue growth and consequent pressure on mature gross margins, plus higher investment costs and some disruption from natural disasters.
In the longer term, CS continues to think that IWG can generate cash returns above the cost of capital and therefore create value in a structurally growing market. However, this has to be balanced against short term earnings (and returns) weakness, rising risks in the UK and lack of visibility.
“We do not think that the longer-term potential is reflected in the share price but also believe that this will remain the case until it can clearly illustrate a sustained improvement in like for like growth/profitability and cash returns on cash invested. That being the case we think that the risk reward over the next 12 months is balanced and, consequently reduce our rating.”
At 1300 BST, the shares were down 3.9% to 210.20p.