Both companies just delivered great results but share price reaction has been very different. Graeme Evans explains why.
Bloomsbury shares surged 18%, to their highest level since the crisis began, as interim results showed how it is benefiting from academic institutions accelerating their digital shift in support of remote learning during the pandemic.
This contributed to the company’s best half-year earnings figure in more than a decade, with a 60% surge in profits to £4 million, much better than the City had been expecting.
Contracts-for-difference trading firm Plus500 has also been punching above its weight this year thanks to unprecedented levels of market volatility caused by the pandemic.
Customer income in its most recent quarter was the second highest in the company’s history and was only beaten by the extreme conditions seen during the previous quarter. A gradual reduction from peak levels of activity has continued in the current quarter, but revenues and underlying earnings for the year should still be in line with analysts’ consensus forecasts.
Shares have been trading at record levels above 1,600p but fell back 8% to 1,478p today as investors took profits amid the possibility of more normal trading conditions.
The US election season, however, could yet stimulate volatile market moves and there’s no end in sight for Covid-19 or the home-working trends helping to drive customer behaviour.
- Smithson Investment Trust: tactics to play US election
- US election poll: here’s what you think of Trump and Biden
- US presidential election: how Trump and Biden will affect stock markets
The favourable conditions have so far enabled Plus500 to build up cash of $723 million, about half of which analysts at Jefferies estimate could be available for distribution to shareholders or set aside for acquisitions.
The broker said: “We assume a $50 million special dividend this year, although this still implies considerable headroom for further distributions and/or acquisitions.”
Liberum, which has a price target of 1,950p, said today’s better-than-expected third-quarter performance also reflected the benefits of the group’s best-in-class trading platform: “Its scalable technology and agile marketing algorithms has enabled it to win significant market share and drive continued improvement in financial returns.”
The City firm increased its full-year earnings forecast by another 8% and pointed out that shares were still only trading on 4.8 times 2020 earnings.
Bloomsbury was also the subject of more upgrades today as its interim results highlighted a performance beyond the wildest dreams of management and investors back in March.
Revenues increased 10% to £78.3 million in the six months to 31 August, with significant growth in online book sales and e-books helping to offset the impact of bookstore closures at the start of the crisis.
Bloomsbury’s consumer division achieved an “excellent performance” with 17% revenue growth and a £2.1 million increase in pre-tax profits, thanks to bestsellers including Why I’m No Longer Talking to White People about Race and Crescent City: House of Earth and Blood.
Net cash of £44.1 million at the end of the period means the company is well placed to invest in new content, as well as resume dividends with an interim award of 1.28p a share.
- Shares for the future: upgrades and downgrades
Shares rose to 248p as Investec Securities upped its target price by 10p to 270p in the wake of today’s results. The broker said: “Macro-economic challenges clearly remain, but we continue to expect Bloomsbury to emerge robustly from the crisis and that its resilient growth will gain greater recognition over time.”
Numis Securities is reviewing its price target of 265p, but said it now expects its full-year profits forecast to be closer to £12 million than the current £8.3 million.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.