Big upsides seen at Games Workshop, Auto Trader and Flutter

Some well-known stocks have been boosted by favourable City comment, including Auto Trader ahead of a ‘long-awaited catalyst’ for shares.

Buy recommendations on “unique and high-quality” Games Workshop (LSE:GAW) and “undervalued” Auto Trader Group (LSE:AUTO) today pointed to share price upsides of 29% and 20% respectively.

The favourable broker comment on the pair came as Balfour Beatty (LSE:BBY) continued its momentum after yesterday’s strong half-year results, with UBS upgrading its target price by 25p to 400p.

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Other City revisions saw analysts at Royal Bank of Canada improve their stance on London Stock Exchange Group (LSE:LSEG) by 200p to 10,500p, compared with today’s 8,522p.

Paddy Power owner Flutter Entertainment (LSE:FLTR), which is the market leader in US online sports betting through FanDuel, was also backed for 15,200p by Citigroup. That’s an upgrade of 200p and a big upside from the level of 10,835p seen this afternoon.

The support for Auto Trader comes ahead of a capital markets day on 6 September, which Bank of America believes should be a “long-awaited catalyst” for the shares.

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The bank is most interested in how the car marketplace plans to unlock the large mid- to long-term opportunity in digital retail. It believes the company is well placed, based on a track record of growth via innovation and the strength of its brand and relationships with car retailer customers.

It added: “We think consumer appetite for online retail is there, but consensus likely bakes in very little given uncertainty on the model.

“So how Auto Trader plans to grow/monetise will be a focus, and suggests potential for upside risk to consensus revenue forecasts in outer years, enhancing Auto Trader’s appeal further versus classified peers.”

The bank also expects a robust outlook for the core business, with prices holding up and Auto Trader’s historic resilience likely to have been enhanced since Covid.

The shares have risen from 500p in mid-June to 661p today, but Bank of America sees the potential for 795p after raising its price target by 5% today.

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It said: “Auto Trader looks undervalued for its growth/quality, leaving an attractive upside. The historic discount versus classified peer Rightmove (LSE:RMV) has not substantially narrowed, and multiples remain discounted versus their five-year average.”

The positivity on Games Workshop came from analysts at Jefferies after they reviewed the FTSE 250-listed maker of Warhammer miniatures in the wake of July’s full-year results.

Its takeaways included a bigger-than-expected 39% jump in the company's number of email subscribers and the fact that more miniatures were sold than any year before. Amid pressures from Covid, supply chain disruption and higher freight costs, the company’s full-year profits increased by 4% to another record of £156.5 million.

The bank made little change to its current year forecasts but said there was upside risk to its 2024 forecasts, which currently point to 8% revenues growth and profits up 10%.

Jefferies said: “We continue to view Games Workshop as a unique and high-quality asset, with its vertical-integration, accrued intellectual property, and huge fan base representing meaningful commercial barriers to competition.”

Shares are currently at 7,515p after a decent run from the 6,005p seen in mid-June, but the bank has a new price target of 9,700p and an upside scenario figure of 11,550p. The stock topped 12,000p at the peak of its pandemic recovery in September.