Broker tips: Standard Chartered, Darktrace

(Sharecast News) - Analysts at Berenberg hiked their target price on financial services company Standard Chartered from 640.0p to 750.0p on Friday, citing a "moment of clarity" on growth and returns. Berenberg stated Standard Chartered's recent first-quarter results, and the 14% share price reaction that accompanied it, had transformed the company into the third-best performing bank in its coverage year-to-date.

"Standard Chartered's Q1 2022 pre-tax earnings exceeded consensus expectations by 38%. This reflected stronger revenues, which rose 9% year-on-year and exceeded consensus by 11% - partly due to strong financial market activity. The bank also achieved this performance without meaningfully higher costs relative to consensus," noted Berenberg.

While the German bank believes that the reaction partly reflects low expectations and Standard Chartered's "cheap" valuation prior to the results, it said the bank's revenue and cost outlook has also improved.

"Trading on 5.8x our FY 2023E EPS (which are 9% above consensus), we believe that Standard Chartered remains undervalued," said the analysts, who also stood by their 'buy' rating on the stock.

Coming off restriction, analysts at Jefferies issued cyber-defence company Darktrace with a 'buy' rating on Friday following the group's "positive" third-quarter trading statement.

Jefferies stated Darktrace's quarterly update indicated that annual recurring revenue growth was 46.3%, while overall revenue growth was 50.1%, supported by 37% growth in customer numbers, suggesting broad-based and sustainable growth. The investment bank highlighted that faster ARR growth than customer growth implied higher ARR per customer.

Meanwhile, Jefferies, which has a 730.0p target price on the stock, noted that the statement revealed that gross margins, ARR churn, and net ARR retention rates were consistent with prior periods, resulting in what the analysts called "a very balanced quarter, with strong momentum".

"Coming off restriction, we update our numbers for the positive 3Q22 trading statement which leads to yet another upgrade to FY22 guidance. ARR and revenue growth guidance is raised by c.1%-1.5%, while there is a meaningful upgrade to EBITDA margins from 11% to 16% (at the midpoint)," said Jefferies.

"We think this clearly highlights the operational leverage which is inherent in the business model. Darktrace remains one of our favoured names in the sector."