Broker tips: Tesco, building materials, chipmakers

13th Jan 2010 12:17

A 'solid' Christmas at Tesco's UK stores has impressed JP Morgan, which raised its price target on the supermarket chain and promised to review its rating if the performance continues.UK like for like sales in the six weeks to 9 January, excluding petrol and VAT, rose 4.9%, better than the 3.7% predicted by the broker and ahead of the 2.8% reported for the third quarter.As a result, JPM has pushed back its target price date from June to December 2010 and raised it to 390p from 335p.'We remain Underweight for the moment but acknowledge that trading in the UK is proving better than we expected. If the momentum shown by the latest TNS data is maintained in the next couple of periods, we would review our thesis and rating accordingly,' it said.The European building materials sector has had a strong 12 months and Credit Suisse thinks further upside is limited for the next few months, so cuts its stance to 'market weight' from 'overweight'.Its view on UK-listed players is mixed. Insulation board maker Kingspan is downgraded to 'underperform' from 'neutral' with price target dropped to €4 from €5.4, but it keeps Ireland's CRH as 'outperform' and still sees 23% upside potential to its new €22 price target, cut from €23.The Swiss bank is more upbeat on Travis Perkins, which it upgraded to 'outperform' from 'neutral' with target raised to 972p from 830p as current market forecasts are too bearish.There was mixed news for British chip makers after Goldman Sachs (GS) published a review of the European technology hardware sector, with Wolfson getting the thumbs down and ARM seeing its price target lifted.Scottish semiconductor designer Wolfson Microelectronics is expected by Goldman to carry on racking up operating losses even if the top line picks up after the seasonally weak first quarter.'Wolfson's seasonally weak 1Q [first quarter] suggests substantial losses in 1H10 [first half of 2010] and annualised losses in 2010, making it one of only three covered companies in our European Tech coverage universe expected to post losses this year despite what we expect to be a meaningful cyclical recovery,' the bank's research note suggests.GS has downgraded Wolfson to 'sell' but has left its 18-month price target unchanged at 125p. Cambridge based chip-maker ARM Holdings is much more to Goldman's liking. 'We believe ARM's IP [intellectual property] (via its licensing model) will remain at the core of the Wireless Chip market with exposure to the fast-growing smartphone segment as the vast majority of designs are inherently based on ARM's architecture,' GS predicts.The bank has upped its revenue and earnings estimates for 2010 by 2% and 4% respectively for ARM, while the 2011 estimates have been ratcheted up by 7% (revenue) and 11% (earnings per share).The 18-month price target has been bumped up to 210p from 180p.