Broker tips: GB Group, WPP, Chemring

(Sharecast News) - Canaccord Genuity cut its target price on GB Group from 400p to 365p on Wednesday, saying additional investment in the company's new Go platform would weigh on nearterm margins despite a solid recent update.

The Canadian bank said an extra �6m of spend had disrupted what it had hoped would be "uneventful" interims, though it viewed the investment as sensible given strong early customer uptake. Go has been designed to consolidate GBG's identity modules into a lowcode orchestration platform, enabling faster customer onboarding and quicker deployment of new features.

Canaccord pointed out that GB Group management has indicated that Go can be supported within its existing research and development budget beyond FY27, reinforcing the oneoff nature of the spend. However, the temporary increase in operating costs means FY27 margins were now expected to fall roughly two percentage points to 21-22%, leaving earnings per share broadly flat yearonyear and lagging midsingledigit revenue growth.

Canaccord also highlighted that a year of flat earnings typically leaves the shares rangebound, but argued that valuation remained compelling, with the stock trading near alltimelow multiples, generating an 8% freecashflow yield and showing signs of sustained organic growth improvement. It also noted ongoing strategic and M&A takeout optionality.

The broker added that its new 365p target price implies close to 80% upside potential, based on a 17x CY27 peergroup price-to-earnings ratio.

Goldman Sachs initiated coverage of WPP on Wednesday as it took a look at the European media sector, starting the stock at 'sell' with a 240p price target, which implies around 14% downside.

It said: "Our cautious view is based on the following factors: (1) We believe it may be challenging for WPP to return to organic growth in the near term without a reshaping of its portfolio; while asset disposals could represent an upside lever, they would also remove associated earnings contribution, with the net EPS impact likely to depend on the valuation realised; and (2) we expect free cash flow to remain weak, with �500m of cost savings mostly offset by higher employee incentives (per guidance), investment and salary inflation."

Goldman Sachs also said it sees unlevered free cash flow remaining broadly stable between 2025 and 2028 and forecasts �684m of free cash flow in 2028, versus Visible Alpha consensus of �710m and in excess of �1bn in 2022 and 2023.

"This implies WPP is trading on a 2028E unlevered FCF yield of 9% before any negative working capital movements," it said.

Analysts at RBC Capital Markets slightly lowered their target price on aerospace and defence firm Chemring from 600p to 580p on Wednesday as it acknowledged second half execution risks still remained.

RBC Capital said demand backdrop for energetics has "become increasingly attractive", boosted by depleted US munitions stockpiles, underpinning the stock's core investment case. "This combined with an uptick in customer engagement in H1, suggests continued order book growth for Energetics," said RBC.

The Canadian bank, which has an 'outperform' rating on Chemring, said the case for incremental energetics capacity additions also remains a potential catalyst.

"While execution risk remains for H2, increased order cover at S&I is a plus point," it said, noting that management recently maintained its FY26 guidance for 70% of operating profits to come in H2.

RBC made "minor estimate changes" reflecting adjusted splits between Chemring's divisions, most notably dropping its earnings per share estimates by 4% on average on increased share count estimates.

"We had previously modelled in the �40m share buyback programme in full for FY26/27 (of which �8.7m has been completed), but now remove this from our estimates," said RBC, which noted that Chemring has paused buyback activity.

However, clearly increasing leverage was Chemring's ongoing investment into Norway, leading RBC to increase its FY26 net debt estimate to �192m - above consensus estimates of �166m.