Interactive Investor

Shares round-up: rare winners on a bad day for markets

11th May 2021 16:40

Graeme Evans from interactive investor

There’s been little to shout about as sellers take charge, but some stocks are doing very well.

Backing for beleaguered Deliveroo (LSE:ROO) and a burst by some of London's lesser lights meant all was not lost for investors on a day when just about every FTSE 100 index stock was in the red.

Air Partner (LSE:AIR) shares took off 10% after annual results revealed better-than-expected current trading, while on AIM the retailer Joules Group (LSE:JOUL) jumped 6% on the back of strong online demand.

Deliveroo shares more than 1% higher at 250p, at a time when other tech stocks were being clobbered, was perhaps the most surprising sight in an otherwise downbeat session.

The shares are still far off the 390p starting point in March's ill-fated £7.6 billion IPO, although a trio of ‘buy’ notes from City brokers gave further cause for hope following yesterday's deal with Waitrose to handle the supermarket's same-day deliveries.

Numis Securities is the most optimistic after initiating coverage at 400p, based on a belief that Deliveroo is well placed to take share in a fast-growing yet under-penetrated market.

Counterparts at Bank of America agree there are plenty of opportunities for Deliveroo to exploit, aided by some of the sector's best unit economics and a strong management team.

They added: “We think concerns over rising competition in the UK are overdone as we think Just Eat Takeaway and Deliveroo serve different ends of the market.

“While the market is focused on the battle around food, we think online grocery will represent a surprisingly significant contribution to orders and gross transaction value”.

Bank of America sees a potential 35% upside for shares to 335p, with potential regulation of the gig economy one reason for caution around the stock. Jefferies has a price target of 390p after arguing the company still has a path to sustainable UK profits.

Jefferies said: “Deliveroo has first-mover advantage in a category Just Eat Takeaway (LSE:JET) is choosing to ignore, namely grocery. This is a recipe for a profitable co-existence.”

Just Eat Takeaway shares were 1% lower at 920.4p today in a session when the FTSE 100 index dived by more than 2.5% due to fears over inflationary pressures.

The tailwinds behind Air Partner shares reflect recent encouraging trading in US private jets and freight, with the latter able to assist with the vaccination roll-out by moving large shipments of raw materials used in the manufacture of vaccine vials.

In the UK and Europe, the group charters team has seen strong demand from governments and the sports sector, although private jets bookings are slower due to ongoing travel restrictions.

Air Partner's safety and security division is also seeing the “green shoots of recovery” as airports scale up operations in preparation for flying during the summer season.

Across the group, first quarter trading exceeded management hopes and trading levels for the second quarter are also expected to be stronger than originally forecast. Profits more than doubled to £11.6 million in the year to January 31 after the group played a vital role in evacuations, repatriations and the provision of PPE in the face of the pandemic.

Shares were today 8p higher at 86p, their highest level since August after the company also increased its total dividend by a third to 2.4p a share. The full-year payment is due on 15 July.

Joules shares are trading at their highest level since towards the end of 2019 at 275p. They were lifted today when the lifestyle brand said its results to the end of July should be ahead of the City's forecast for revenues of £187 million and underlying profits of £4.1 million.

It is seeing particularly strong e-commerce growth after demand on Joules' own websites lifted by about 50% in the year to date and the recently-acquired Garden Trading business performed ahead of hopes with sales up 85%.

Store sales for the four weeks since reopening on 12 April have also been ahead of the comparable period two years ago.

Chief executive Nick Jones said: “Although the past 12 months have been incredibly challenging for the retail sector, I truly believe that Joules is now in an even stronger position than ever before.

“We have an increasingly digital-led business, more diversified income streams and a broader product proposition.”

His optimism is backed by analysts at Liberum after they upgraded their price target by 100p to 400p alongside material profit upgrades of 35%-60% over the broker's forecast horizon.

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