UK share tips, Moonpig’s debut and Novacyt’s rally

2nd February 2021 15:46

Graeme Evans from interactive investor

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A team of analysts is backing these stocks to fly, while other big names are in the news today.

 

A nine-strong list of “high-conviction” buy ideas today named Glencore (LSE:GLEN), Vodafone (LSE:VOD), Barclays (LSE:BARC) and Flutter Entertainment (LSE:FLTR) among stocks most likely to surprise in the 2020 results season.

The research from US bank Jefferies identifying the European stocks with potential catalysts was released on the day BP (LSE:BP.) provided a downbeat start to the flurry of blue-chip reports.

Tomorrow’s third-quarter trading update from Vodafone may redress the balance as Jefferies thinks the mobile phone giant will show robust trends in its problem markets of Italy and Spain.

As it now expects group revenues excluding roaming to be in growth, Jefferies thinks that Voda’s recent progress is not reflected in a share price of 126.7p. It has a target price of 170p.

The others on the buy list are all due to report annual results over the next month, starting with mining giant Glencore on 16 February. Higher commodity prices should lead to strong earnings and cash flow and, according to Jefferies, mean the reinstatement of dividend payments.

The bank has a price target of 350p, compared with 246.7p today, and notes that the current valuation of 9.3 times 2021 earnings appears attractive.

Barclays follows two days later, when fourth-quarter figures are predicted by Jefferies to show that the City has been too pessimistic about credit costs for 2021.

With revenues in the markets division likely to be somewhere between 2019 and 2020 levels. Jefferies is flagging a 100% upside to the 2021 consensus. It has a price target of 227p, against the level of 137.8p seen today.

On betting business Flutter, Jefferies believes that the market has not priced in further cost synergies from the acquisition of Stars Group or the rapid growth of the US sports betting market. The company, which reports results on 2 March, has a price target of 17,500p, compared with 13,890p currently.

The other ‘buy’ stocks on the Jefferies list are Maersk, Euronext (EURONEXT:ENX) Societe Generale (EURONEXT:GLE), ArcelorMittal (NYSE:MT) and Worldline (EURONEXT:WLN).

Moonpig’s impressive stock-market debut

As well as a busy calendar of blue-chip earnings, investors have an improving pipeline of new stock market issues to monitor. The latest IPO arrival is Moonpig, with the online greetings card business off to an impressive start on its first day of conditional dealings.

Shares were initially priced at 350p for a valuation of £1.2 billion, but with the flotation being heavily oversubscribed the stock was later trading at 432p.

Moonpig should appeal to the tech crowd as it has built a 60% market share by harnessing data science and artificial intelligence. At the current valuation, it will be eligible for a place in the FTSE 250 index.

The performance follows in the footsteps of Dr Martens (LSE:DOCS), which is now trading at 450p after initially being priced at 370p on Friday for a valuation of £3.7 billion. Unconditional dealings in the stock begin tomorrow.

Investors will hope that the pair's robust debuts encourage the likes of Deliveroo, Darktrace and Trustpilot to pursue their IPO ambitions.

Novacyt back in demand

One stock that continues to capture the imagination of investors is Novacyt (LSE:NCYT), having risen by as much as 8,000% since the diagnostics firm revealed a year ago it had developed a PCR test for Covid-19. A trading update last Friday detailed the impact, with revenues increasing by over 20 times to £277 million in 2020 from £11.5 million a year earlier.

A cash position of more than £90 million at the end of December means Novacyt is now well placed to strengthen its presence across the diagnostics market.

Despite a strong start to the year as global cases of coronavirus remain high, the shares fell sharply on Friday after Novacyt said it was too early to give guidance on 2021 trading.

The shares slumped from almost 1,300p to just above 800p, but were on the front foot today after chief executive Graham Mullis announced the launch of a “new and innovative portfolio” of assays to aid the diagnosis of new variants of Covid-19.

He said: “With this launch, Novacyt continues to demonstrate its ability to remain at the forefront of this rapidly evolving field.”

Shares rallied 6%, or 48p, to 873p.

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.

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