Source: Sharecast
The bank said its analysis points to key end markets now improving - or bottoming - with multiple drivers of upside versus consensus expectations, leaving its 2025 adjusted EBITA forecasts 5% ahead and its blue-sky scenario 9% ahead versus expectations.
"While the shares have bounced in recent weeks, they still trade at a discount to its historical average despite being on trough earnings and a wider discount than average to Instrumentation peers which should improve as conviction in the earnings increase," it said. "We look for further colour on order momentum to be supportive at the upcoming FY24 results."
Deutsche Bank downgraded FeverTree Drinks on Monday to 'hold' from 'buy' and slashed its price target on the stock to 800.0p from 1,325.0p as it said the deal with Molson Coors "lacks near-term fizz".
FeverTree announced last month that the Coors Light maker would be buying an 8.5% stake in the posh tonic maker for £71.0m in cash, with the proceeds set to be returned to shareholders via a share buyback programme.
The company said it had entered into a long-term strategic partnership with Molson Coors for the exclusive sales, distribution and production of the FeverTree brand in the US.
Deutsche Bank said that initially, it thought the deal with Molson Coors represented a positive move for the FeverTree brand in the US and the overall investment case for the equity.
"Having modelled out the details of the partnership, we still think it is a positive strategic step for the US growth opportunity but the negative impact on the near-term financials mean any potential meaningful upside is several years away, in our view," it said.
DB said the partnership arrangement fundamentally changes the group margin recovery opportunity, which its previous 'buy' case was predicated on.
"Previously, we modelled group adjusted EBITDA margins recovering to mid-twenties by FY28E, which underpinned a more than 40% adjusted EPS compound annual growth rate across FY24-28E," it said. "On our updated forecasts, the new structure limits margin progression to 17% by FY28E, and indicates 17.5% adjusted EPS CAGR over the same time frame."
Analysts at Berenberg slightly raised their target price on cosmetics firm Warpaint London from 680.0p to 700.0p on Monday, noting the group's margin management was not to be overlooked.
Berenberg said Warpaint's minor revenue miss reported in its FY24 trading update did not detract from its conviction in the sustainability of the group's growth opportunity.
"We see the -28% share price reaction since the announcement as an overreaction given our perception of the cyclicality of the slowdown," said Berenberg, which has a 'buy' rating on the stock.
The German bank also noted that Warpaint reported revenues that were 4% below consensus in FY24, yet crucially, it stated this was followed by "a sharp reacceleration in growth" through January, to 15% year-on-year.
"While the weakness in December is disappointing, we continue to see a significant runway of revenue growth ahead, primarily due to the yet-to-be-won component of the existing customer store estate, which Warpaint is pursuing expansion within," concluded Berenberg.
