Analysts at Jefferies reckon its time to stop selling Reckitt Benckiser Group Plc (LON:RB. shares as the rout in certain consumer product stocks now looks “overdone”.
Jefferies, in a note entitled “Turning positive, amidst the chaos”, upgraded the Dettol and Cilit Bang maker to ‘hold’ from ‘sell’ and set a new price target of 5,275p up from 5,000p.
At the same time, elsewhere, Exane BNP switched to ‘outperform’ from ‘neutral’ with a price target of 6,300p and HSBC repeated a ‘buy’ with a price target of 6,800p.
According to Jefferies, Reckitt’s turnaround under new management will be “slow and uncertain” but it is positioned as “positively geared” to Covid-19 coronavirus as its health and hygiene brands represent around 25% of its business.
Commenting on the consumer brands sector as a whole, Jefferies analyst Martin Deboo said: “The 17% sell-off across our coverage looks overdone … on what we think are suitably stress-tested assumptions.
“Inelastic demand and the ultimately transient nature of COVID-19 should see the sector through, after an ugly 2020.”
He highlighted that sales of heath & hygiene products – such as sanitisers, antiseptics and analgesics - are growing, and, the broker expects this will remain persistent through 2020. This point of view meant that Jefferies can no longer justify its bearish call on Reckitt.
Unilever is retained as Jefferies ‘key pick’ in the sector.