Broker tips: Tesco, easyJet, Axis-Shield

23rd Sep 2011 12:36

Evolution Securities has upgraded supermarket giant Tesco from sell to neutral, on the back of a £500m price repositioning which begins next week."The repositioning takes effect from Monday and we will take a close look in stores then, but in principal this appears to be the right strategic move by Tesco and should help the company get on the front foot," said Evolution analyst Dave McCarthy.Evolution says that the fact that The Co-Op, Waitrose, Ocado, Sainsbury and others have "priced off Tesco" in the past shows that its price position is wrong. "Tesco is a dominant market leader with significant economies of scale and should be much cheaper than the competition."The broker sets a new target price of 350p.Prime Markets suggests selling easyJet into any strength despite the low-cost airline raising its profit guidance on Thursday.The broker highlights the recent power battle between the board and founder Stelios Haji-Ioannou (who together with his family owns around 38% of the company) and the damage it has done to the share price. "Haji-Ioannou resigned from easyJet's board last year amid demands that the airline pay dividends rather than expand its fleet, and the power battle looks set to linger on," said head of dealing Richard Curr."It is clear to the Prime Markets team where the power base really lies," Curr said, as Stelios seems to be getting his way over higher dividends. "Until the hand of Stelios ceases to be the deciding factor in Easyjet fortunes, Prime Markets will continue to rate the shares a sell into any strength."Investec has kept its buy rating on Dundee-based diagnostics firm Axis-Shield, following yesterday's statement by potential buyer Alere urging shareholders to accept its 460p-a-share bid. "Whilst Alere makes some sensible points, we do not agree with all the points it is making and we remain of the view that whilst Alere is serious about acquiring Axis, it is trying to take advantage of current market conditions to buy Axis on the cheap," said Investec analyst Sebastien Jante.The broker has suggested that shareholders should sit tight and do nothing at least until the 26 September, "the last day Alere can revise its offer under the current timetable. Nor do we see any point in doing anything before 10 October, the next closing date."Investec keeps a 530p target price. BC