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.

Start your day with The Independent, sign up for daily news emails
News
ebooksAn unforgettable anthology of contemporary reportage
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

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific
In this the person to restore our trust in the banks?

In this the person to restore our trust in the banks?

Dame Colette Bowe - interview
When do the creative juices dry up?

When do the creative juices dry up?

David Lodge thinks he knows
The 'Cher moment' happening across fashion just now

Fashion's Cher moment

Ageing beauty will always be more classy than all that booty
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination

Health fears over school cancer jab

Shock new Freedom of Information figures show how thousands of girls have suffered serious symptoms after routine HPV injection
Fifa President Sepp Blatter warns his opponents: 'I forgive everyone, but I don't forget'

'I forgive everyone, but I don't forget'

Fifa president Sepp Blatter issues defiant warning to opponents
Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report

Weather warning

Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report
LSD: Speaking to volunteer users of the drug as trials get underway to see if it cures depression and addiction

High hopes for LSD

Meet the volunteer users helping to see if it cures depression and addiction
German soldier who died fighting for UK in Battle of Waterloo should be removed from museum display and given dignified funeral, say historians

Saving Private Brandt

A Belgian museum's display of the skeleton of a soldier killed at Waterloo prompts calls for him to be given a dignified funeral