Since the start of COVID-19 sell-off in mid February, the transport analysts noted that share prices across the team’s coverage fell by more than the Euro Stoxx 600, but have also recovered faster.
Inchcape has been upgraded to ‘overweight’ from ‘neutral’, with its target price lifted to 595p from 510p.
The car distributor and retailer’s earnings are “under severe pressure in the short run”, the analysts noted after last month’s interims showed revenue down 36% and underlying operating profits down 84%.
With many of the group’s markets at multi-year lows, the Cazenove number crunchers felt the tide was about to turn and was reassured by a strong balance sheet in the meantime.
“Timing in difficult, but at some point, we think the group will begin to see materially stronger earnings momentum.”
The rationale was given that after an 18% rise in the price in the last month, the shares now seem “closer to fair value” and the target price was cut to 267p from 312p
“We prefer to pause here until some structural risks such as ESG and remote working etc become clearer.”