In mid-morning trade, Ultra Electronics shares topped the FTSE 250 fallers list, down 7.3%, or 102p at 1,288p.
Berenberg cut its target for the defence contractor to 1,300p from 1,550p and reiterated a ‘sell’ rating on the stock noting a recent rally by the shares.
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Since then, they added, the stock has now rallied by 20%, which they think creates “an opportunity to short into the forthcoming trading update.”
JPMorgan sees defence underperforming
Meanwhile, JPMorgan Cazenove reduced its target price for Ultra Electronics to 1,735p from 1,785p, while retaining a ‘neutral’ rating on the stock, in a review of the European aerospace and defence sector.
In their note to clients, the JPMorgan analysts said: “Over the next 12 months we expect the European Civil Aerospace sector (ECA) to outperform the European Defence Sector (EDS), though not as dramatically as in 2017 (c30%).
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They added: “ECA fundamentals remain very strong, whereas the outlook for the EDS is mixed. That said, in recent weeks we have seen some mean reversion (EDS outperforming ECA) and that could certainly continue in the early part of 2018.”
The analysts concluded: “We would be inclined to buy ECA on the current pullback and take profit on any pronounced EDS rally.”