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(Sharecast News) - Analysts at Canaccord Genuity cut their target price on Capita tfrom 900p to 750p on Friday, but said the shares still offered a buying opportunity given expectations for a sharp profit recovery next year.
Canaccord Genuity said additional costs and investment required in Pension Solutions to service Capita's CSPS contract would reduce FY26 adjusted underlying earnings by £25m to £40m and free cash flow by £35m to £50m, reflecting surge staffing, technology spend and diverted resources.
While Canaccord described the downgrades to this year's EBIT, earnings per share and free cashflow as "material", it also highlighted that most of the one‑off costs should unwind in 2027.
Outside Pension Solutions, Canaccord said 2026 was "shaping up as a year of solid progress", noting that Capita's Contact Centre disposal remained on track for early August and that the firm's Public Service division had delivered 2.4% first‑half revenue growth and £1bn of contract wins, up 15% year‑on‑year.
The Canadian bank expects a V‑shaped recovery in FY27, forecasting an £58m uplift in adjusted EBIT and a near‑tripling of EPS, driven by the reversal of CSPS‑related costs and £40m of savings from simplification and reduced support for the disposed Contact Centre business.
Canaccord said Capita's "normalised" FY27 valuation remained compelling, with the shares trading on a 0.27x enterprise value-to-sales ratio, a 3.5x EV/EBIT ratio and 4x earnings, far below peers. It maintained its 'buy' rating, arguing that deep value remained despite the target price reduction.
RBC Capital Markets downgraded Wizz Air on Friday to 'underperform' from 'sector perform' as it argued that "poor earnings quality may weigh on a hockey stick recovery".
RBC said that on its forecasts, Wizz Air will generate a negative or below peer group return on capital employed/return on invested capital, and trades above peers on EV-valuation metrics throughout the bank's forecast period.
"This suggests that the market is pricing in more of a 'hockey stick' recovery than we forecast," it said. "We forecast circa 6-7% EBIT margins by FY30E, (which would be typical for European airlines in CY26 and on our outer year forecasts), although below company ambitions, which we think are to return to double-digit percentage margins, delivered pre-pandemic."
RBC, which kept its price target on Wizz at 900p, implying around 20% downside, also said it doesn't expect recent declines in fuel to translate into near-term upgrades.
"We cut our FY27E-FY28E forecasts below consensus even on reflecting a lower fuel price versus our last update (as we trim unit revenues/ increase ex-fuel unit costs)," it said. "We allow for higher fuel costs than consensus in 1Q, think RASK [revenue per available seat kilometre] decline could be a risk beyond 1Q given still-elevated capacity growth and note a tough comp for ex-fuel unit costs in 4Q, given the timing of other income over FY26."
