Broker tips: Fresnillo, Smith and Nephew, 3i Group

(Sharecast News) - Canaccord Genuity downgraded Fresnillo on Monday to 'hold' from 'buy' as it pointed to a strong run over the past three to six months. It said that with the silver price up 39% year-to-date and 23% since the early August lows, it is good to see Fresnillo following those trends with its own share price progression this year.

"Relative to the moves in the silver price mentioned above, the Fresnillo share price is also up 30% YTD, but up a more impressive 39% since its early August lows," it said.

Canaccord said it has updated its modelling to include what it thought was a good set of third-quarter production results as well as its 4Q24 precious metals price deck.

All in, it has increased its 2024 EBITDA forecast by just 3%, but its 2025 EBITDA forecast is up a more substantial 13%. Canaccord also lifted its price target on the stock to 760p from 680p.

Jefferies has slashed its target price for medical devices maker Smith & Nephew from 1,400p to 1,250p after challenges in China weighed heavily on third-quarter results.

Nevertheless, the broker kept a 'buy' rating on the stock, saying that the shares' valuation is undemanding by historical standards.

Smith & Nephew reported on Thursday that it was cutting its 2024 and 2025 guidance on the back of struggles in China, where it was impacted by worse-than-expected headwinds across the surgical businesses.

"This is a clear step back as investors were slowly starting to reward management for improved visibility and consistency," Jefferies said in a research note on Monday.

"While unhelpful, China setbacks seem temporary and SN is slowly reaping the benefits from portfolio shifting toward faster-growth segments and recent R&D efforts, which support higher, sustainable growth."

The stock has dropped by around 20% over the past three months, leaving its close to an all-time low price-to-earnings ratio of just 12.5. Jefferies said it sees "ample room for [a] re-rating".

Analysts at RBC Capital Markets downgraded 3i Group from 'outperform' to 'sector perform' on Monday, citing valuation grounds.

RBC said it views 3i Group as a "best-in-class business", with a "conservative but successful" model and a strong management team.

"This is evidenced by III's outperformance in the last few years, despite challenging macro backdrop," said RBC, which has a 3,425.0p target price on the stock.

The Canadian bank stated a "good chunk" of this outperformance had been driven by Action, which it views as "a very high-quality retailer".

However, RBC noted that 3i's share price has risen more than 140% in the last three years, and it now views the shares as more fairly valued.