Following a good run for the share price Singer Capital Markets is contemplating revising its buy recommendation for IG Group despite the spread betting firm delivering full year results in line with expectations.
The broker has bumped up its price target from 440p to 485p, and said it still likes the company's prospects over the longer term but it thinks the company is now trading close to its fair value.
"Whilst comparables are increasingly tough, strong momentum in client opening has continued which bodes well for further revenue growth across most geographies. In addition, the regulatory approvals at the US business, Nadex, allow IG now to develop a white label business in that region. This is likely to take some months before we see revenues coming through but over the longer term, this could offer significant potential," suggests Singer.
The broker foresees a decline in Japanese revenues in the short term as the company copes with regulatory changes and a competitive environment. The company has acknowledged that this will inevitably have an immediate adverse effect on revenues but Singer said this has been reflected in its estimates.
Panmure Gordon also thinks the shares are starting to look a bit toppy. At 14.5 times current year earnings, the shares continue to trade well within their historic valuation range, the broker notes. However, although Panmure sticks with its "buy" recommendation it sees "no clear scope for upgrades in today's statement," and consquently "we expect some profit taking on the back of a strong recent share price run."
Stockbroker tips from ShareCast
Broker snap: IG ripe for profit-taking
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