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Barclays has named three European stocks — Smurfit Kappa , Leroy Seafood and Raiffeisen Bank — for investors to consider buying for the upcoming quarter. The Wall Street bank’s strategists said they have a “high conviction” on the stocks since the “risk-adjusted returns are attractive” for these companies. All three stocks are also traded in the U.S. The investment bank compiled a list of 20 European small and mid-cap stocks, offering an average upside potential of 26%. Among them, the strategists chose to highlight the three stocks to clients in a note on Mar. 7: Smurfit Kappa Barclays is bullish on paper packaging maker Smurfit Kappa with a £38.30 ($49.10) price target, indicating 16% upside potential. London-listed Smurfit Kappa is taking over U.S.-based rival WestRock in an $11 billion deal to form the world’s biggest paper and packaging company. When the deal concludes, the new entity Smurfit WestRock will be listed in New York and London, the companies said. Barclays analysts believe the merged company deserves a better valuation multiple since it would be one of the most efficient companies in the sector. “We believe SKG warrants a premium multiple vs. peers due to its vertically integrated business model and efficient capital allocation,” wrote Barclays analyst Gaurav Jain. “In the long term, we expect SKG to have the [highest return on invested capital] and [adjusted earnings margins] and outperform its European corrugated packaging peers.” SKG-GB 1Y mountain Leroy Seafood Barclays also highlighted Leroy Seafood Group, a Norwegian seafood company. Barclays expects shares to rise by 22% to 58 Norwegian Kroner ($5.5) over the next 12 months. The investment bank expects a meaningful recovery for the company in 2024, driven by a normalization of fishing volumes after “biological challenges in 2023”. The bank also pointed out that the company will improve margins by using a new “submerged” cage technology for fishing. These cages hold the fish and are deployed below the levels where lice, a natural but unwanted parasite, affect fish in the open sea. “LSG’s investments in novel farming technologies appear to be yielding some positive early results which, if sustained, could help drive progress to FY25 goals which are well ahead of consensus,” the analysts said. Raiffeisen Bank Barclays named Raiffeisen Bank International, an Austrian banking group, as another stock to own in the next quarter, giving it an upside potential of 35%. Shares of Raiffeisen fell nearly 10% at the start of this week on the threat of U.S. sanctions over doing business in Russia. The lender has been involved in a complicated deal with Austrian construction company Strabag , trying to divest itself of its Russian business. According to Barclays, Raiffeisen is expected to close its deal with Strabag in the first quarter of 2024, which is seen as a near-term catalyst for the bank. Completing the Strabag deal would help Raiffeisen reduce its equity exposure in Russia by approximately 37% and lower its potential loss from exiting Russia. “Strabag deal improves credibility on Russia exit plan,” Barclays analyst Krishnendra Dubey said in a note to clients on Mar. 7. “So this remains an important risk pending on the RBI equity story.”
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