Savills stocks plunged into the red amid rising fears about the outlook for the real estate market.
On a bloody day for the FTSE 250 broker, the stock fell 9.4 percent, or 88 pence, to 851 pence after Peel Hunt slashed its revenue and profit forecasts for this year through the end of 2024.
The broker also downgraded its “buy” rating to “add” and lowered the target price from 1275p to 1000p.
Downgrade: Savills plummeted 9.7% after Peel Hunt slashed its revenue and profit forecasts for this year to the end of 2024
Peel Hunt said Savills is a “high quality company” but the downgrade reflected a slowdown in real estate transactions and increased economic uncertainty.
The gloomy update comes as rising interest rates drive up the cost of commercial real estate mortgages and loans.
Peel Hunt analyst Clyde Lewis said: ‘Commercial transactions have fallen sharply in recent months, especially in the UK.’
He also warned that Covid lockdowns in China are “likely to have hit that market hard” in another blow to Savills.
And Lewis said the housing market has been ‘softer’ – although he added that the main London market, where properties cost millions of pounds, has ‘held up better’ than other areas.
While the broker is struggling in the short term as buyers delay making decisions due to increased market volatility, Peel Hunt remained optimistic about Savills’ future prospects.
“The outlook for short-term forecasts is not great,” the analysts said, before adding: “We believe the group remains an attractive investment, capable of delivering decent growth over a three- to five-year horizon.” .’
Stock watch – RBG
RBG had a rough start to the week after warning earnings for the year would be lower than hoped.
The professional services group said it would earn between £11m and £12m this year – well below analyst estimates of £17.4m.
The warning came after LionFish, a litigation finance subsidiary that helps fund legal battles and gets a share of the proceeds, lost two cases it had invested in.
RBG shares fell 22.8 percent, or 19 pence, to 64.5 pence.
The FTSE 100 gained 0.2 percent, or 11.31 points, to 7567.54, but the FTSE 250 fell 0.2 percent, or 33.7 points, to 19329.58.
Asia-focused stocks led London’s top index on hopes that China’s Covid restrictions could ease.
Prudential gained 5.3 percent, or 55p, to 1085.5p, while miners were also in the black as metal prices rose. Anglo American rose 1.2 percent, or 41p, to 3337p, Rio Tinto added 1.6 percent, or 87p, to 5671p and Fresnillo rose 0.2 percent, or 1.4p, to 897p.
The price of Brent crude oil rose slightly higher, hovering around $90 a barrel, after the Opec+ group of oil-producing countries, including Russia and Saudi Arabia, maintained production levels over the weekend. It helped BP up 0.5 percent or 2.6 pence to 483.5 pence and Shell added 0.4 percent or 10 pence to 2375.5 pence.
Barratt Developments and Persimmon flipped as the only two blue-chip homebuilders not to get a buy recommendation from Jefferies. Shares in Barratt Developments fell 0.9 percent, or 3.8 pence, to 405.6 pence, and Persimmon fell 1.5 percent, or 19 pence, to 1,276.5 pence.
There was better news for Bellway, with Jefferies upping its rating from “buy” to “hold” because the stock is “too cheap.” Shares rose 1.2 percent, or 23 pence, to 1967 pence.
Mike Ashley’s Frasers Group rose 1.2 percent, or 10.5 pence, to 898.5 pence after receiving a vote of confidence from Shore Capital.
The broker began its coverage by issuing a ‘Buy’ rating and a price target of 1200p, with Frasers – owner of Sports Direct, Jack Wills and Flannels – well positioned to ‘weather the storm’ towards retail.
Serica Energy fell 8.7 percent, or 27.5 pence, to 289.5 pence after the North Sea producer said it would temporarily suspend drilling a well.
The group had found some gas, but said it had yet to work out whether there was enough to make money.
Serica previously said the well was “potentially transformational,” and estimated it could hold about 300 billion cubic feet of gas — the equivalent of 60 million barrels of oil.
Video game company Keywords bought San Francisco-based digital support platform Helpshift in a deal worth up to £61.6 million. Shares fell 4.1 percent, or 120 pence, to 2,828 pence.
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