Broker tips: Berkeley, Barratt Redrow, ITM Power

(Sharecast News) - Morgan Stanley downgraded Berkeley Group and Barratt Redrow on Tuesday and cut price targets across the board, as it took a more cautious stance on housebuilders - pointing to rising macro risks, fading rate support and the re-emergence of cost uncertainty. "Valuations are cheap, but catalysts are scarce," it said. "Absent clearer rate support, demand visibility is limited and we reset estimates lower, despite depressed sector valuations."

Morgan Stanley downgraded Berkeley to 'underweight' from 'equalweight' and slashed its price target on the stock to 2,990p from 3,840p as it noted the firm has cut profit forecasts, paused land acquisition and prioritised balance sheet strength over growth amid weak London and South East demand. The bank said its 2027 pre-tax profit estimate sits 6% below consensus.

Morgan Stanley also downgraded Barratt Redrow to 'equalweight' from 'overweight' and cut the price target to 300p from 430p, stating that while scale and a multi-brand platform offer strategic flexibility, the ability to fully realise revenue synergies was constrained in a weak demand environment, leaving performance increasingly macro-driven.

Analysts at Berenberg nudged up their target price on ITM Power from 100p to 110p on Tuesday after the hydrogen economy company secured roughly £86.5m of UK government funding, through an equity investment of £40m by Great British Energy and a potential grant from the UK Department for Energy Security and Net Zero of £46.5m.

Berenberg, which has a 'buy' rating on the stock, said the proceeds would support ITM Power's establishment of a new large-scale automated manufacturing line in the UK, with an annual capacity of one gigawatt for the firm's next-generation Chronos electrolyser stack.

"We think that the investment is a compelling endorsement of ITM's technology, as well as a clear demonstration of the UK government's commitment to promoting UK manufacturing capability in the sector, helping to underpin the country's ambitious hydrogen targets as part of its hydrogen allocation round funding programmes," said Berenberg. "In our view, this boost to its production capacity, alongside the launch and development of Chronos, is set to be a gamechanger for ITM and a strong platform for further growth."

Berenberg updated its numbers to incorporate the cash investments and expected capex from the new manufacturing line, with the German bank leaving its near-term revenue and underlying earnings numbers unchanged, but highlighting "the significant platform" the investment provides.