Interactive Investor

Four popular stocks in trouble

18th November 2021 15:57

Graeme Evans from interactive investor

They’ve all had their moment in the sun, but events have conspired against this once mighty bunch of well-known stocks. Here’s why.

Some popular smaller stocks have left a hole in retail portfolios after Naked Wines (LSE:WINE) today cooled Netflix (NASDAQ:NFLX) comparisons, Metro Bank (LSE:MTRO) lost its takeover suitor and EnQuest (LSE:ENQ) reset production guidance.

Other closely followed companies to suffer double-digit percentage declines included Abingdon Health (LSE:ABDX), although there was better news from elsewhere in the Covid-19 testing industry after former high-flying stock Novacyt (LSE:NCYT) briefly traded above 300p for the first time since September.

Metro Bank suffers significant withdrawal

The 18% collapse in the price of Metro Bank shares reverses the gains seen a fortnight ago after it emerged that private equity firm Carlyle was looking at a possible offer.

Carlyle has walked away with no further explanation, leaving Metro to tell investors that it continues to “strongly believe” in its standalone strategy and future prospects.

The bank's most recent update in October showed improvements in its lending mix from an expanded product offering, as chief executive Dan Frumkin's continues his turnaround plan.

Having made an underlying loss of £271.8 million on its 10th anniversary in 2020, a move into the black has been hindered by fixed costs from its 78 stores. At a time when the pandemic has accelerated the switch to online banking, Metro has no current plans to expand its estate.

Shares were briefly above 4,000p in March 2018 but a major accounting error followed by the major restructuring under Frumkin have left the challenger bank trading at just 108.7p, including today's 23.95p fall following the withdrawal of Carlyle.

Naked Wines strips back sales forecasts

Naked Wines shares attracted a flurry of buying interest last month after top-performing US hedge fund boss Glen Kacher touted the stock as the Netflix of wines.

The wine subscription business, which split from the retail operations of Majestic Wine, has seen significant growth after lockdowns boosted interest in the UK and US.

Its results for the 26 weeks to the end of September today revealed 947,000 members, an increase of 25% on last year, as sales rose on a constant currency basis to £159.3 million.

Pre-tax profits of £1.3 million compared with last year's loss of £8.9 million, but a focus on serving existing customers rather than chasing new business, means guidance for full-year sales has been lowered from £355-£375 million to £340-£355 million.

It also forecast lower repeat sales margins as it deals with supply chain and storage costs.

Shares slumped 15%, or 100p to 590p, despite chief executive Nick Devlin telling investors he is “delighted” by the company's progress so far this year.

He added: “We have a large long-term value creation opportunity driven by a disruptive business model, an under-penetrated $25 billion total addressable market, exceptional winemakers and wine, and a loyal customer base.”

Enquest heads south

Oil and gas explorer Enquest has been one of the best-performing stocks in the FTSE All-Share over the past year, but that progress was checked today after a downgrade to 2021 production guidance due to its upstream North Sea assets.

This reflected a compressor system outage affecting output from the Magnus area and a short unplanned outage at Kraken, which is Enquest's largest single asset.

Production will now be around 45,000 barrels a day compared with the low end of 46,000-52,000 barrels, but analysts at Jefferies believe strong commodity prices and the performance of the recently acquired Golden Eagle field will protect cash flow generation.

Shares fell 2.85p to 19.5p but Jefferies has a price target of 30p and Barclays is at 39p. The latter said: “Current commodity prices largely mitigate the impact on cash flows, but it is a reminder of the challenges operating mid to late life upstream assets.”

Abingdon Health takes turn for the worse

Abingdon Health joined AIM in December after it raised £22 million from institutional investors to support increased manufacturing of its rapid lateral-flow test.

The shares were priced at 96p for a market capitalisation of £92 million, but they were today 9.5p lower at 38.5p as the York-based firm revealed in full-year results the impact of delays in invoice payments from the Department of Health and Social Care (DHSC).

Faced with a working capital shortfall in the first quarter of the new financial year, the company said it had received indications of funding support from certain directors while it also investigates options to raise further capital.

Chief executive Chris Yates is optimistic about concluding the DHSC dispute, having held constructive talks in recent weeks. He added: “While the Covid-19 market environment remains uncertain, the group is well placed to support our global customers, having expanded the range of Covid-19 rapid tests under manufacture.

“We now have a range of Covid-19 antigen and antibody lateral flow tests with manufacturing agreements or in the late stages of technical transfer, with our capabilities meaning we are also able to support any changes in product specification in the event of new variants.”

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