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Broker tips: Experian, Vodafone, Thomas Cook

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Updated: Fri, 19th May. 17:29:52

Alexander Bueso

(ShareCast News) - Jefferies downgraded credit checking company Experian to 'hold' from 'buy' and cut the price target to 1,550p from 1,670p following the company's preliminary full-year results on Thursday.

Although increased innovation should help the group to grow at least in line with end markets, Jefferies pointed out that US credit momentum is slowing and said it is unclear whether Consumer Services can revive after more than two years of disruption.

Jefferies said that while it was expecting an eventual slowdown in North American credit growth, the moderation occurred sooner than expected. It added that revenue growth in North American Consumer Services was at the bottom of the guidance range.

"We see limited near term upside to estimates without acquisitions and, with valuation multiples at cycle highs, there is no longer enough upside to merit a buy."

Vodafone Group saw its stock recommendation lowered to 'equal weight' from 'overweight' at Barclays, with the bank raising concerns about the competitive pressures which the company was facing, despite an upbeat earnings report earlier this week.

Barclays left Vodafone's target price unchanged at 225.0p despite the recommendation change.

The telecoms giant's prospects remain fairly positive according to Barclays, but rising competition related to the advent of new technology could hamper its growth.

Barclays argues that Vodafone's valuation "looks broadly up with events, and that FCF growth beyond FY18 will likely be tempered by rising competitive intensity."

Vodafone posted its full-year results for the year to 31 March on Tuesday, with group total revenue down 4.4% to 47.6bn, while full-year organic service revenue grew 1.9%.

After offloading its stake in Verizon Wireless, Barclays has maintained a positive stance towards Vodafone.

"We believe Vodafone is investing to transform its growth profile post the disposal of Verizon Wireless, and has balance sheet flexibility to invest whilst many of its peers are less able to do so," Barclays added.

Thomas Cook shares took a hit on Friday after they were downgraded by Barclays after a good rally since last summer.

In November Barclays had upgraded the shares and set a target price of 100p, which has almost been breached, with the shares outperforming Tui and the FTSE 250 and is still facing a challenging market with growing concerns over the UK consumer.

"We believe the management team is doing all of the right things to make TCG a sustainable, profitable business," analysts wrote on Friday, saying the turnaround over the last five years has been impressive.

But Barclays acknowledged that downgrading to 'equalweight' from the previous 'overweight' rating "might be wrong" as earnings momentum may improve if Thomas Cook can successfully turn around Condor in Germany, deliver most cost savings, with the group's high financial leverage meaning a small change in EBIT has a big impact on EPS.

News provided by Digital Look

Disclaimer: This news feed is provided by Digital Look Ltd. BullBearings Ltd do not necessarily share the views expressed within the stories. The stories are for general information purposes only and not a solicitation or personal recommendation to deal. BullBearings Ltd accepts no liability or responsibility for any of the content contained in the information provided by Digital Look Ltd.

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