Market Report: ARM Holdings' year just keeps on getting better
Tuesday 08 February 2011
Surging to the top of the blue-chip index, ARM Holdings continued its fantastic start to 2011 yesterday as analysts predicted that there could be further highs to come.
The chip maker – which last week released forecast-beating full-year figures – advanced 23p to 611p, meaning that it has now risen nearly 45 per cent this year alone.
A partnership with Microsoft, the growing smartphone and tablet markets as well as recent takeover speculation around the group have all contributed to its rise, yet Numis Securities believes the Cambridge-based company could still see some major gains.
"Cranking the dials on Arm's long-term revenue drivers suggests significant upside," said the broker's analyst, Nick James. "While clearly there is risk, evidence suggests there is potential to achieve quite aggressive scenarios."
Increasing its target price to 660p and its revenue estimates for the next few years, he added that "any investment case is really driven off the long-term earnings potential". In the analyst's most bullish scenario – which he gave a 25 per cent probability of happening – he said its target price could reach 1,000p.
Overall, the FTSE 100 just failed to achieve its highest level since June 2008, putting on 53.65 points to close at 6,051.03. Commodities drove up the top-tier index again, and – with copper achieving a new high – Rio Tinto and Kazakhmys jumped up 128p to 4,625p and 21p to 1,631p respectively.
Meanwhile, Xstrata gained 50.5p to close at 1,467.5p as investors piled in in anticipation of today's full-year figures. Deutsche Bank said it was expecting "strong results... driven by robust production and high copper price", while Citigroup described it as "the stock for 2011".
The broker reiterated its "buy" recommendation on the company, "given [its] superior growth, ability to do further accretive merger and acquisition deals and cost-reduction potential".
Randgold Resources pushed up 130p to 5,110p as it said it had seen its profits for 2010 increase by nearly 50 per cent. The gold miner was also bullish in its production forecast for this year, predicting a rise of around 70 per cent.
At the end of Friday's trading, Cairn Energy was left in last place over worries that the $9.6bn deal to sell its stake in Cairn India to Vedanta Resources could be called off over demands made by the Indian government.
Yesterday, however, it rallied 9.1p to 435.4p in the wake of comments made over the weekend by the country's oil secretary, who said that he was hopeful a "positive solution" could be found.
Elsewhere, the return of gossip about a bid for Centrica saw it edge up 2.5p to 330.6p following vague speculation last week that the British Gas owner could be in line for a potential approach.
on the second line, analysts focused on Meggitt's takeover potential as the aeroplane parts supplier moved 15.5p higher to 364.2p. UBS upgraded its advice on the company to "buy", saying that after recent falls its "share price is... not reflecting Meggitt's good growth prospects".
The broker's analyst Avi Hoddes pointed out the group was "an attractive acquisition target for several large civil aerospace and US defence peers" although he added that its recent purchase of PSA for $685m "has reduced the probability" of an approach.
Logica was 6p better off at 143.9p, as Numis's Will Wallis was positive ahead of its preliminary results, expected near the end of the month.
Citing "broad evidence of steady improvement in European IT services market conditions", the analyst increased his rating to "add" and commented that despite remaining "very concerned about long-term structural issues, we see a near-term trading opportunity for Logica, given the depressed valuation".
The release of a trading statement prompted Bellway to jump up 18p to 657.5p, with the housebuilder revealing a small year-on-year rise in the number of homes it sold from August to the end of January. The company was also cautiously upbeat on the outlook for 2011, claiming that "the number of visitors and subsequent reservations since the beginning of [the year] has been encouraging".
The news that it had found oil in two of its Russian wells saw Exillon Energy soar over 10 per cent higher in the early hours of trading, and – despite failing to stay near its early peak – at the bell the oil producer was still up 15.2p at 388p.
amid the small-cap companies, Chaucer was driven forwards 8.75p to 61.5p after announcing it had received a number of prospective approaches, although the Lloyd's insurer said there was no certainty of an offer being made.
Takeover hopes also remained high around 888, with the online gambling group confirming it was still in talks with Ladbrokes, and it climbed 0.75p to 44.5p.
However, on the Alternative Investment Market, Silence Therapeutics retreated 1.25p to 5.65p as it said it was "no longer in discussions which may lead to an offer for the company".
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