Investing.com – Bernstein downgraded its investment stance on Reckitt Benckiser (LON:RKT), citing the continuation of a rollercoaster of litigation which has hit the consumer goods giant hard.
At 08:15 ET (13:15 GMT), Reckitt stock fell 0.4% to £49.75, having fallen over 8% over the course of the year.
“Reckitt shares have suffered from a rollercoaster over the past twelve months, driven in no small part by the NEC litigation in the US,” said analysts at Bernstein, in a note dated Nov. 4.
The company’s stock fell 13% in February following weak FY23 results, and dropped another 15% in March following the adverse ruling in the Watson NEC trial. Shares then jumped 7% on Friday, after the Jury in the Whitfield NEC trial found in Reckitt’s favor.
“Following the rally seen since the start of August, we estimate that the NEC litigation discount has narrowed from >£10bn to only around £4bn today, and as such Reckitt is now approaching our estimate of fair value,” Bernstein said.
Thus, Bernstein has downgraded its stance to ‘market-perform’ from ‘outperform’, and cut its price target to £53.00 from £60.00.
The bank has also revised its thinking around the likely value of any potential settlement.
“We believe that the right ballpark for a settlement figure is likely to be in the region of $100k per plaintiff (down significantly from our predecessor’s $1-3m estimate). However we also revise upward our expected number of cases, significantly.,” Bernstein said.
Its “base case” settlement cost for Reckitt, rises from $500m to around $1bn, and as such the £4bn litigation “discount” vs. our revised £0.8bn estimated settlement value no longer leaves significant upside.