Market Report: Imagination gets a vote of confidence

Apple wobbled last week, and shares in smartphone makers shuddered. The US superstar tech brand reported its lowest sales growth since 2009, and investors ran scared from Apple suppliers such as Imagination Technologies, which lost more than 5 per cent after the bad Apple news.

But Morgan Stanley's scribes dispelled fears about Imagination, and the shares leapt more than 12 per cent to the top of the mid-tier index.

The Hertfordshire-based group designs the graphic-processor units for the screens of smartphones but Morgan Stanley's techies reckon there are two things that punters are underestimating. They think it is time to buy the shares, and rate them overweight. They raised their price target from 450p to 570p and the shares gained 56.4p to 497.9p.

The two reasons for their sudden keenness? Samsung's anticipated Galaxy S4 and the growth potential of emerging markets.

Morgan Stanley's team is basing its strong enthusiasm for the stock on a hunch that Imagination has won work on Samsung's S4 smartphone. The phone is rumoured to be launching in April. Morgan Stanley said Imagination's management hinted in December that it had secured a "design win of meaningful units at Samsung".

It bet that, should the win prove to be the Galaxy S4, there could be a 16 per cent gain in the royalties it gets from sales.

But before you get carried away and rush out to buy up the shares, the team added: "We note the company has not yet confirmed details. If we are wrong, upside to our base case would be lower."

But S4 aside, Morgan Stanley reckons there is plenty of potential in emerging markets. It thinks Imagination's "exposure to the Chinese smartphone market through a licence with MediaTek", which has 44 per cent market share, is being undervalued. It adds that Imagination's current share price "implies the market is underestimating the ramp-up" for MediaTek sales in the next few years.

In the wider market, bullish investors on the benchmark FTSE 100 index were finally stopped in their tracks after a five-day run when shock data from across the Pond suggested the US economy shrank at an annualised rate of 0.1 per cent in the fourth quarter last year. The index retreated 16.08 points to 6,323.11.

Dragging the leaderboard down was the Chilean miner Antofagasta. The costs of producing copper are set to soar but the demand for the metal is flat. The group said production was up more than 10 per cent, but its weaker outlook drove down the shares by 106p to 1169p.

Keeping it company was the oil services group Petrofac as news out of Italy spread to the Square Mile. A surprise profit warning from a Milanese oil and gas specialist sent shares in its global peers plummeting. The shocker for Saipem caused traders in London to dump Petrofac stock.

Saipem's profit warning emerged last night after the market closed. It said last year's profits will be 10 per cent below consensus and this year's will be a staggering 50 per cent below. Peer Petrofac plunged 122p to 1,615p, and Citi's scribes said that the Saipem siren is "likely to lead the whole sector down".

But Malcolm Graham-Wood, an analyst at VSA Capital, played down the impact on Petrofac, and even thought the dip in its share price could be time to buy. He said: "Other service companies have suffered in the wake of this warning but it's not actually truly comparable, except maybe to Technip. Accordingly, I would take the chance to top up with a few Petrofac shares, or at least not panic out at this stage."

The supplies distributor Bunzl was top of the table after analysts at Numis Securities rated it a buy with a share-price target of 1,505p. The shares delivered a 28p gain to 1,134p.

On Tuesday night, a US judge accepted an agreement by the oil giant BP to plead guilty for its role in the Deepwater Horizon disaster. It will pay a $4bn (£2.5bn) fine. Some decided now was time to suggest that BP might sell its US operations to Exxon, but most thought this was idle chatter. The shares edged up 0.25p to 475.9p.

The chief executive, finance director and chairman of Quercus Publishing have upped their stakes in the publisher of Stieg Larsson's The Girl with the Dragon Tattoo, and the shares rose 5p to 58p. The company warned last week that annual profits would be "significantly below market expectations".

The AIM oil driller Bowleven's shares spiked 4.25p to 67.75p after it said it had made a "potential" oil discovery off the coast of Cameroon.

News
A 1930 image of the Karl Albrecht Spiritousen and Lebensmittel shop, Essen. The shop was opened by Karl and Theo Albrecht’s mother; the brothers later founded Aldi
people
Arts and Entertainment
Standing the test of time: Michael J Fox and Christopher Lloyd in 'Back to the Future'
filmA cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Arts and Entertainment
Flora Spencer-Longhurst as Lavinia, William Houston as Titus Andronicus and Dyfan Dwyfor as Lucius
theatreThe Shakespeare play that proved too much for more than 100 people
News
exclusivePunk icon Viv Albertine on Sid Vicious, complacent white men, and why free love led to rape
PROMOTED VIDEO
Arts and Entertainment
Stir crazy: Noel Fielding in 'Luxury Comedy 2: Tales from Painted Hawaii'
comedyAs ‘Luxury Comedy’ returns, Noel Fielding on why mainstream success scares him and what the future holds for 'The Boosh'
Life and Style
Flow chart: Karl Landsteiner discovered blood types in 1900, yet scientists have still not come up with an explanation for their existence
lifeAll of us have one. Yet even now, it’s a matter of debate what they’re for
Arts and Entertainment
'Weird Al' Yankovic, or Alfred Matthew, at the 2014 Los Angeles Film Festival Screening of
musicHis latest video is an ode to good grammar. But what do our experts think he’s missed out?
Sport
New Real Madrid signing James Rodríguez with club president Florentino Perez
sportColombian World Cup star completes £63m move to Spain
Travel
Hotel Tour d’Auvergne in Paris launches pay-what-you-want
travelIt seems fraught with financial risk, but the policy has its benefits
Arts and Entertainment
booksThe best children's books for this summer
Life and Style
News to me: family events were recorded in the personal columns
techFamily events used to be marked in the personal columns. But now Facebook has usurped that
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Programme Director - Conduct Risk - London

£850 - £950 per day: Orgtel: Programme Director - Conduct Risk - Banking - £85...

Business Analyst (Agile, SDLC, software)

£45000 - £50000 Per Annum + excellent benefits: Clearwater People Solutions Lt...

Finance Manager - Bank - Leeds - £300/day

£250 - £300 per day + competitive: Orgtel: Finance Manager - Accountant - Bank...

Compliance Officer - CF10, CF11, Compliance Oversight, AML, FX

£100000 - £120000 per annum + BONUS + BENEFITS: Harrington Starr: A leading fi...

Day In a Page

Noel Fielding's 'Luxury Comedy': A land of the outright bizarre

Noel Fielding's 'Luxury Comedy'

A land of the outright bizarre
What are the worst 'Word Crimes'?

What are the worst 'Word Crimes'?

‘Weird Al’ Yankovic's latest video is an ode to good grammar. But what do The Independent’s experts think he’s missed out?
Can Secret Cinema sell 80,000 'Back to the Future' tickets?

The worst kept secret in cinema

A cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Facebook: The new hatched, matched and dispatched

The new hatched, matched and dispatched

Family events used to be marked in the personal columns. But now Facebook has usurped the ‘Births, Deaths and Marriages’ announcements
Why do we have blood types?

Are you my type?

All of us have one but probably never wondered why. Yet even now, a century after blood types were discovered, it’s a matter of debate what they’re for
Honesty box hotels: You decide how much you pay

Honesty box hotels

Five hotels in Paris now allow guests to pay only what they think their stay was worth. It seems fraught with financial risk, but the honesty policy has its benefit
Commonwealth Games 2014: Why weight of pressure rests easy on Michael Jamieson’s shoulders

Michael Jamieson: Why weight of pressure rests easy on his shoulders

The Scottish swimmer is ready for ‘the biggest race of my life’ at the Commonwealth Games
Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

The 'scroungers’ fight back

The welfare claimants battling to alter stereotypes
Amazing video shows Nasa 'flame extinguishment experiment' in action

Fireballs in space

Amazing video shows Nasa's 'flame extinguishment experiment' in action
A Bible for billionaires

A Bible for billionaires

Find out why America's richest men are reading John Brookes
Paranoid parenting is on the rise - and our children are suffering because of it

Paranoid parenting is on the rise

And our children are suffering because of it
For sale: Island where the Magna Carta was sealed

Magna Carta Island goes on sale

Yours for a cool £4m
Phone hacking scandal special report: The slide into crime at the 'News of the World'

The hacker's tale: the slide into crime at the 'News of the World'

Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
We flinch, but there are degrees of paedophilia

We flinch, but there are degrees of paedophilia

Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
The truth about conspiracy theories is that some require considering

The truth about conspiracy theories is that some require considering

For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn