Broker tips: Keyword Studios, JTC

(Sharecast News) - Citi stuck to its 'neutral' recommendation for Keywords Studios, telling clients that the risks around generative artificial intelligence struck them as "likely overstated". "For what it is worth, it strikes us that some of the concerns about the long-term risk associated with generative AI - which are oft cited as the factor behind the recent aggressive derating - are likely overstated," they said in a research note sent to clients.

They did however slash their discounted free cash flow-based target price from 3,030p to 2,100p as they fine tuned their valuation model.

The specifics behind that reduction were the higher so-called Beta induced by rising rates and higher share price volatility and an increase in the discount rate from 8.5% to 10.0%.

"That our change in PT is so significant is an apt reminder of how much of KWS's value is in the medium- and long-term growth and that even a small change in discount rate can diminish its NPV."

Analysts at ShoreCap upgraded their recommendation for shares of fund administration services outfit JTC to 'buy' in the wake of recent weakness in the share price.

In a research note sent to clients, they also updated their model to factor in the purchase of South Dakota Trust Company -its largest thus far - and the associated fundraising.

As a result, their estimate of 'fair value' for the shares was upped from 840.0p to 850.0p.

They also sounded a positive note on the SDTC acquisition.

In particular, they noted SDTC's 22-year track record of "consistent" growth, the fact that over 98% of its revenues were recurring from fixed fees, stronger EBITDA margin than JTC and "strong" cash conversion.