Broker snap: BAE valuation too good to pass up

5th Jan 2010 13:20

Deutsche Bank has moved to an overweight stance on those stocks in the commercial aerospace sector that are focused on the aftermarket, rather than on aircraft manufacture.The bank believes that things are looking up for the commercial aerospace sector in 2010, thanks to a recovery in air traffic. It also reckons doom and gloom about defence spending cutbacks has been overdone, and the valuation for BAE Systems 'remains too compelling to ignore'. Cobham, however, has almost reached Deutsche's target price and consequently the stock has been downgraded from 'buy' to 'hold'. The target price has been nudged up to 245p from 220p.The German bank has lifted its sum of the parts price target for BAE Systems from 420p to 435p. 'Some positive potential catalysts exist in Q1 [first quarter] which should provide reassurance that near-term compression in US Defence budgets will not be as severe as feared,' Deutsche suggests.