Broker tips: Rainbow Rare Earths, Johnson Matthey, ATC Group

Analysts at Berenberg initiated coverage of Rainbow Rare Earths with a 'buy' recommendation and a 33.0p price target on Thursday, implying a whopping 228% upside.

Berenberg stated that due to "a complex recovery process", China "dominates" the production of refined metal, at roughly 90% of global supply but, owing to a mixture of "significant demand" growth and strategic uses, users were increasingly searching for non-Chinese sources of metal - something the analysts said was "difficult" and would "take time".

The German bank said that from a demand standpoint, major growth comes in the form of electric vehicles and wind turbines, with four key rare earths used in the manufacture, and efficient use, of permanent magnets.

"We forecast a supply-unconstrained CAGR (2022-30) of 13% for neodymium, 12% for praseodymium, 12% for dysprosium and 14% for terbium across these two key uses," said the analysts.

Berenberg added that realistically, supply will struggle to meet demand, although substitution and thrifting will offset some of this demand.

Berenberg also revised its target price for shares of Johnson Matthey from 2,200.0p to 2,350.0p, pointing to the manufacturer's product pipeline in catalyst technologies and the possibility of partnerships in its hydrogen technologies arm.

The German bank, which reiterated its 'buy' rating on the stock, said there was a blemish in the form of £40.0m of uncompensated for group-wide inflation during the first half, although it noted the majority of that could be traced back to its Clean Air arm.

More than offsetting that in the judgement of Berenberg was "increasing certainty" about sales growth in other more highly-rated areas of the business.

In that regard, the pipeline of potential sustainable projects in the catalyst division had increased from 70 to 100 and also pointed out the potential sales expected from Johnson Matthey's low-carbon hydrogen project in North America.

Analysts at Canaccord Genuity lowered their target price on music company ATC Group from 220.0p to 195.0p on Thursday despite the firm's improved revenue and profit performance.

Canaccord Genuity stated that whilst ATC's stake in livestreaming service Driift had reduced, its acquisition of Dreamstage by Driift and additional investment by global streaming service Deezer positioned Driift "strongly for the future" as the market leader, with the global livestreaming market set for "continued growth" over the coming years.

The Canadian bank updated its forecasts to reflect the de-consolidation of Driift from ATC's accounts, with Driift treated as "an associate" from 1 October onwards. Full-year forecasts were also updated to reflect ATC's investment in Driift across the year-to-date coupled with the additional cost base of Dreamstage.

"Looking to FY23E, we have also taken a slightly more prudent stance on forecasts for the core artist management and development business given the challenging macro backdrop which could impact artist touring activity," said Canaccord, which reiterated its 'buy' rating on the stock.

"That said, we continue to believe that the Group is well positioned to capitalise on many growth opportunities that have been presented from the disruption and market dislocation caused by the pandemic. There is positive momentum within the core artist management and development divisions, and we believe Driift is well capitalised to exploit the forecast growth in livestreaming."