Barclays has earmarked three European stocks – Smurfit Kappa, Leroy Seafood and Raiffeisen Bank – for investors to consider buying in the coming quarter. Strategists at the Wall Street bank said they have a “high degree of confidence” in the stocks because “risk-adjusted returns are attractive for these companies.” These three stocks also trade in the United States. The investment bank compiled a list of 20 European small- and mid-cap stocks with an average upside potential of 26%. Of those, the strategists chose to highlight these three stocks to clients in a March 7 note: Smurfit Kappa Barclays is bullish on paper packaging maker Smurfit Kappa, with a price target of £38.30 ($49.10), indicating upside potential of 16%. London-listed Smurfit Kappa will acquire US rival WestRock in an $11 billion deal to form the world’s largest paper and packaging company. The new entity, Smurfit WestRock, will be listed in New York and London upon completion of the transaction, the companies said. Barclays analysts believe the combined company should command a better valuation multiple because it will be one of the most efficient companies in the industry. “We believe SKG has a better P/E than peers due to its vertically integrated business model and efficient capital allocation,” Barclays analyst Gaurav Jain wrote. “Over the long term, we expect SKG to have (the highest investment return on capital) and (adjusted margins), and outperformed European corrugated packaging peers.” SKG-GB 1Y mountain Leroy Seafood Barclays also highlighted Norwegian seafood company Leroy Seafood Group. Barclays expects shares to rise 22% to NOK 58 ($5.50) over the next 12 months. The investment bank expects the company to achieve a meaningful recovery in 2024, driven by normalization of catches following the 2023 Bio-Challenge. The bank also noted that the company will improve profit margins through the use of new “underwater” cage fishing technology. The cages are used to house fish and are deployed below the level where lice, a natural but harmful parasite, affects fish in the open ocean. Analysts said: “LSG’s investments in new agricultural technologies appear to be producing some positive early results and, if sustained, could help drive forward FY25 targets well above consensus.” Raiffeisen Bank Barclays to Austrian banking group Raiffeisen Bank International ranks as another stock worth holding next quarter, giving it a 35% upside potential. Raiffeisen shares fell nearly 10% earlier this week as the United States threatened sanctions on its operations in Russia. The bank entered into a complex deal with Austrian construction company Strabag in an attempt to divest its Russian operations. Barclays said Raiffeisen expects to complete the Strabag deal in the first quarter of 2024, which is seen as a near-term catalyst for the bank. Completing the Strabag deal will help Raiffeisen reduce its equity exposure in Russia by approximately 37% and reduce potential losses on its exit from Russia. “The Strabag deal adds to the credibility of Russia’s exit plan,” Barclays analyst Krishnendra Dubey said in a note to clients on March 7. “As such, this remains an important unresolved risk in the RBI stock story.”
