Three London-listed stocks – Team17, Drax Group, and Oxford Biomedica – are poised for significant growth, with RBC Capital Markets analysts predicting increases exceeding 50% within the next 12 months. These predictions are based on a combination of factors including strong recent performance, positive analyst sentiment, and promising future growth prospects. The companies operate in diverse sectors, showcasing the potential for strong returns across the UK market. This article delves into the specifics of each company and the reasons behind the optimistic outlooks.
Key Takeaways: Your Guide to Potential Investment Gems
- Team17, a video game publisher, is projected to increase by 51.6%, reaching £3.60 per share due to strong management and a new growth strategy.
- Drax Group, a major UK power plant operator, is forecast to soar by 65%, fueled by growth in its core business and a recent share buyback program.
- Oxford Biomedica, a gene and cell therapy company, could double in value despite already exceeding 70% growth this year, signifying exceptional potential in the biotech sector.
- RBC Capital Markets, a reputable investment bank, underpins these predictions with detailed analysis and positive forecasts for the long-term.
- This presents a unique opportunity for investors seeking significant returns in the dynamic London Stock Exchange market.
Team17: A Video Game Publisher Poised for Growth
Team17, an England-based video game publisher focusing on “indie games developed by independent developers,” is projected to experience a 51.6% increase in share price, reaching £3.60 ($4.68) over the next 12 months, according to RBC Capital Markets. This optimistic prediction is underpinned by several key factors.
RBC’s Rationale for Team17’s Projected Growth
RBC Capital Markets initiated coverage of Team17 in July, highlighting the crucial role of its “premium” management team. The analyst, Ross Broadfoot, specifically praised the combination of Founder Debbie Bestwick’s indie expertise, CEO Steve Bell’s strategic vision, and Chair Frank Sagnier’s experience in franchise building and mergers & acquisitions (M&A). “With a combination of founder Debbie Bestwick’s indie expertise, new CEO Steve Bell’s refreshed strategy and clear messaging and new Chair Frank Sagnier’s experience in both franchise building and M & A, we believe the group is well positioned to drive both organic and inorganic growth,” Broadfoot stated in a July 15th note to clients. This strong leadership is seen as a catalyst for both organic and inorganic growth.
While September’s results slightly missed revenue expectations (£80.6 million vs. £81.5 million), net profit significantly exceeded projections at £19.2 million. Broadfoot acknowledged the recent share price weakness, suggesting potential concern over new title performance. However, he emphasized the company’s progress in cost control and first-party IP growth, noting a 150bps margin accretion at the adjusted earnings level. Broadfoot’s impressive 75% success rate, as reported by TipRanks (meaning three out of four of his ratings in the past year yielded profits for investors), adds further credence to the optimistic forecast. The median price target for Team17 remains at £3.60, solidifying the 51.6% upside potential.
Drax Group: A Powerhouse with Significant Upside Potential
Drax Group, one of the UK’s largest power plant operators, is expected to surge by a remarkable 65% in the next year, according to RBC Capital Markets. This prediction follows a significant development: a £300 million share buyback program announced in July, representing nearly 15% of the company’s market capitalization at the time. The immediate effect of this buyback has already been substantial, pushing the stock up by almost 20% since the announcement.
RBC’s Positive Outlook on Drax
RBC analyst Alexander Wheeler highlighted the investment bank’s positive view of Drax’s core business growth. Drax primarily generates electricity by burning wood pellets, a sustainable energy source. Wheeler attributed the significant upside potential to the company’s strong first-half results reported on July 26th. The combination of the share buyback program and the positive growth trend in the core business creates a compelling case for Drax’s future performance. The sustainable energy sector is positioned for significant growth, further enhancing this positive outlook.
Oxford Biomedica: A Biotech Star with Continued Potential
Oxford Biomedica, a gene and cell therapy company spun out of the University of Oxford, has already experienced impressive growth—over 70% this year. However, RBC Capital Markets believes it still holds considerable untapped potential, projecting that the stock could double in value. This is the most bullish outlook among seven analysts covering the stock.
Oxford Biomedica’s Growth Trajectory
RBC analyst Charles Weston emphasized that the stock remains “materially undervalued” despite its strong performance. The company’s first-half 2024 financial results showcased a robust 18% increase in sales, reaching £51.8 million compared to the previous year. Looking ahead, RBC’s projections are even more ambitious, suggesting a potential 387% rise over the next three years as the company transitions to profitability. Weston justified this bold prediction: “As OXB should turn meaningfully profitable in 2026 and could reach more of a peak margin in 2028, we apply a 20x EV/[adjusted profit] (a slight premium to peers to reflect OXB’s higher expected growth) to our estimate of 2028E [adjusted profit] for an implied end-2027 fair value of £18,” he stated in a September 23rd note to clients. This long-term projection clearly indicates significant confidence in the company’s future.
Conclusion: Navigating Opportunities in the London Stock Exchange
The forecasts by RBC Capital Markets present a compelling case for significant growth across diverse segments of the London Stock Exchange. Team17, with its strong management and strategic positioning, offers an exciting prospect in the video game industry. Drax Group’s investment in its core business and substantial buyback program make it an attractive option within the sustainable energy sector. Finally, Oxford Biomedica’s continued potential in the rapidly expanding gene and cell therapy market offers investors a chance to participate in cutting-edge scientific advancements. While any investment inherently carries risk, these three stocks, based on RBC’s analysis, represent substantial opportunities for investors seeking significant returns within the dynamic London Stock Exchange market. However, it is crucial to conduct thorough independent research before making any investment decisions.
