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Here’s what’s happening
Sky hit a record high after Comcast launched a £14.75 per share counterbid, topping the £14 a share offered by 20th Century Fox on Wednesday. The stock immediately traded through the terms of Comcast’s offer as investors anticipated another sweetener from Fox.
But Macquarie analysts argued that the auction for Sky may be reaching its limit and investors have become over-confident. “While a counter-bid is possible, we do not view Sky at £15 as an attractive proposition and view the bidding war as lacking sufficient momentum to support Sky above its current price,” said the broker, which cut Sky off its “buy” list.
Paddy Power led the FTSE 100 gainers after England’s exit overnight from the World Cup was seen as a positive result for the bookmakers. Analysts have estimated total wagers of £2.5bn on the tournament, with around £100m at risk for the industry had England lifted the trophy based on the team’s odds shortening from 25/1 in February to 4/1 going into last night’s match.
Asos dropped after posting weaker than expected third-quarter results and guiding full-year revenue growth to the bottom of its 25 per cent to 30 per cent target. Consensus forecasts were for 28 per cent growth.
Shore Capital trimmed earnings forecasts by 1 per cent but repeated “buy” advice. “Whilst the third quarter was slightly softer from a group revenue perspective, the comment that the fourth quarter has started strongly should provide some reassurance, together with the company highlighting that it expects to meet consensus earnings forecasts for 2018,” it said. “In our view, ASOS remains a structural winner given the shift online together with its global aspirations.”
● Goldman Sachs downgraded ITV to “neutral” from “buy” as part of a European media sector review.
TV advertising trends have been softer than expected this year, “reflecting persisting weak demand from large advertisers and a secular shift of ad dollars to digital. The exception is the UK which is seeing a near-term boost from the World Cup,” said Goldman. As a result, broadcasters have underperformed the wider media sector by 20 per cent year to date. “We believe the sub-sector derating and the lack of dispersion at the stock level – despite the wide range of earnings outlooks – creates compelling opportunities,” it said the broker.
“While ITV remains better positioned structurally than peers owing to its exposure to content, we see near term risk/reward as more balanced following recent outperformance (ITV is the only TV stock up 9 per cent year-to-date versus peers down 16 per cent on average). Near-term upside from the World Cup is already priced in, in our view, while additional investments could be announced at the upcoming strategy refresh.”
Goldman favoured TF1, the French broadcaster, which was upgraded to “buy” from “neutral”. A 26 per cent drop so far this year in spite of TF1’s World Cup boost and “scope for significant margin expansion from self-help and diversification efforts”, it said.
ProSiebenSat.1 and Mediaset Espana were upgraded to “neutral” from “sell” on valuation grounds as part of the same research, while Goldman reiterated Mediaset of Italy as its top sector pick. At an enterprise value of just 5 times 2020 earnings for the core business, Mediaset’s valuation “fails to capture the significant improvement in margins and returns driven by self help and recent content/carriage deals which will be apparent from the second half,” it said.
● Deutsche Bank downgraded Intu Properties to “sell” from “hold” with a price target cut to 150p. It said that a tour of 17 Intu-owned shopping centres across the UK had raised questions about the quality of the group’s portfolio.
● In brief: PageGroup cut to “hold” at Kepler Cheuvreux; Maersk upgraded to “buy” and Hapag-Lloyd raised to “neutral” at Goldman; Vontobel downgraded to “neutral” at Citigroup; Aker BP raised to “overweight” at JPMorgan; Deutz upgraded to “buy” at Berenberg; Inficon raised to “buy” at HSBC; Kvaerner upgraded to “buy” at Kepler Cheuvreux; Roche upgraded to “buy” at Berenberg; ThyssenKrupp upgraded to “buy” at Citigroup.
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