Berenberg has lifted its stance on BAE Systems (LON:BA), arguing that the discount the shares trade at is no longer warranted, Citywire reports. The move comes after earlier this year, JPMorgan Cazenove lowered its stance on the shares, arguing that the British defence contractor was lagging peers.
BAE Systems’ share price jumped in the previous session, adding 2.12 percent to close at 618.00p, outperforming the broader UK market, with the benchmark FTSE 100 index gaining 26.53 points to end the session 0.36 percent higher at 7,425.40. The group’s shares have lost about 1.7 percent of their value over the past year, as compared with a 2.21-percent rise in the Footsie.
Berenberg upbeat on BAE
Berenberg lifted its recommendation on BAE Systems from ‘hold’ to ‘buy’ yesterday, hiking its price target on the shares from 600p to 700p. Citywire quoted the broker’s analyst Andrew Gollan as commenting that the group’s shares had often traded at a discount and this has been exacerbated in recent years due to “anaemic earnings growth, negative sentiment around its core Eurofighter programme and a weak UK defence outlook”.
“BAE’s growth outlook is now much improved and the defence market remains supportive, factors that are not reflected in the current valuation,” the analyst explained, adding that Berenberg now expected “the shares to outperform over the next year driven by a higher rating on this stronger growth profile”.
Other analysts on group
The 18 analysts offering 12-month price targets for BAE Systems for the Financial Times have a median target of 680.00p, with a high estimate of 805.00p and a low estimate of 480.00p. As of April 24, the consensus forecast amongst 21 polled investment analysts covering the defence contractor has it that the company will outperform the market.