HSBC leads banks higher, with resource companies also climbing in London

MW HSBC leads banks higher, with resource companies also climbing in London

By Barbara Kollmeyer

HSBC and energy shares lift FTSE 100

Shares of cybersecurity firm Darktrace tumbled in London on Monday after an analyst investors to sell, saying shares are highly overvalued.

Darktrace stock slid nearly 20% after a team of Peel Hunt analysts led by Oyvind Bjerke initiated coverage on the company with a sell rating and a target price of 473 pence, which implies about 50% downside from Monday's price of 1,037 pence. Darktrace made its debut on the London Stock Exchange in April to a 40% gain.

"Its growth has been driven by its powerful go-to-market strategy, targeting the need for companies to strengthen their cybersecurity defenses. While we believe strong growth rates will continue, we also see a disconnect between the valuation and the ultimate revenue opportunity," said Bjerke and the team.

"Having considered the potential marketsize, the intensifying competition, and Darktrace's limited R&D [research and development] spend, we take a more grounded approach to our valuation, giving a target price of 473p," said the analysts.

Elsewhere, banks and energy names were keeping the FTSE 100 in the black on Monday as the rest of Europe struggled for traction.

The FTSE 100 rose nearly 0.4% to 7,231. The pound was modestly higher at $1.3756. The best sector across the London Stock Exchange was financials and the worst was technology.

Heavyweight HSBC (HSBA.LN) stock climbed 1% after the banking giant reported third-quarter net profit more than doubled from a year earlier, beating expectations, and announced a share-buyback program of up to $2 billion.

The earnings beat was lifted by a substantial net ECL (expected credit loss) release of $659 million, noted John Cronin and Ronan Dunphy, Goodbody analysts in a note to clients. The company also flagged "an improving revenue environment with fee growth across many of its businesses" and net interest income stabilization with growth expected in the coming quarter, they added.

Associated British Foods was the biggest gainer in the FTSE 100, up around 1.8%.

Energy companies led as U.S. crude prices pushed to $85 a barrel and Brent topped that level. Shares of BP (BP.LN) and Royal Dutch Shell (RDSA.LN) rose by more than 1% each.

-Barbara Kollmeyer

$(END)$ Dow Jones Newswires

October 25, 2021 10:32 ET (14:32 GMT)

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