Broker tips: Carnival, Home Retail, easyJet

5th Sep 2012 12:04

Galvan Research and Trading recommends to 'sell' shares of cruise operator Carnival, saying that recent prices cuts are putting pressure on margins."Although Carnival shares and the firm's reputation have rebounded to some degree since the Costa Concordia disaster, the cruise operator has had to cut prices in order to maintain sales. Not only has this had a dramatic impact on profit margins, but with fuel prices continuing to rise there is a real risk the company could slip into a loss," said Galvan's head of research, Andrew Gibson. UBS has added Home Retail to its list of top picks in the UK retail sector, a category which has held up well in recent months.The broker reckons that if Home Retail's Argos brand can produce broadly stable like-for-like sales again in the second quarter, its long-term sale decline will look "more cyclical than structural"."If so, the consensus view that the operating companies have no value (net cash + debtor book = share price) will look misplaced." The broker has upgraded its rating for Home Retail from 'neutral' to 'buy' and lifted its target price for the stock from 90p to 115p.Investec has retained its 'buy' rating and 670p target price for easyJet hailing the airline's new allocated seating plan."We regard this as strategically (higher customer satisfaction and closer product parity against flag carriers, with superior pricing) and financially positive (revenue accretive)," Investec said in a research report.BC