Broker tips: AB Foods, ARM, Wolseley...

23rd Apr 2014 12:59

Panmure Gordon has upgraded its rating for Associated British Foods from 'hold' to 'buy' after the company announced its intention to expand its fast-growing Primark brand into the US towards the end of next year. "This is sooner than we had anticipated, and whilst Primark will continue its measured approach to expansion, in our view this significantly increases the growth potential of Primark." The broker hiked its target price for AB Foods shares from 2,760p to 3,210p.finnCap has reiterated its 'hold' rating and 1,000p target price for chip designer ARM Holdings after the company's first-quarter results showed strong licensing revenues and weak royalties."Overall, the company remains on track for market expectations but is just not showing the growth rates to see the shares push beyond the current price-to-earnings ratio of 40."Wolseley's share price was making gains on Wednesday after Credit Suisse upgraded the stock from 'neutral' to 'outperform', saying that it foresees substantial capital returns at the plumbing and building materials group."Our upgrade to WOS is primarily focused on the potential for capital return - we see potential for 1,400p/share over next five years, equal to circa 40% of market cap - but this must be considered alongside a robust trading outlook, a quality management team, a stock that has underperformed its peer group in the past year and a compelling valuation," Credit Suisse said.The potential value of AstraZeneca's (AZN) drug pipeline is still under-appreciated by the market, with or without a bid from US pharmaceutical peer Pfizer, according to Citigroup.The bank upgraded its rating for the stock from 'neutral' to 'buy' and hiked its target price for the shares from 3,500p to 4,900p. Citi sees an "extreme undervaluation" of AZN's early- to mid-stage oncology pipeline and estimates at least 26% upside to consensus earnings per share after 2017.Spirent Communications's first-quarter results impressed the market on Wednesday with revenues and profits ahead of expectations, though Investec said that figures are "not as good as they appear on the surface"."After a year of unrelenting downgrades, statements that 2014 guidance is retained and market conditions have improved in all regions will likely be taken as a tonic," said Analyst Roger Phillips. However, he said that the stock appears "fairly priced".BC