Credit Suisse cuts Dixons Carphone target, says Xmas trading will be key
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While reiterating their 'outperform' rating on Dixons Carphone's, on Friday Credit Suisse analysts slashed their target price on the stock from 400p to 280p.
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What led them to stick to their recommendation were the generally resilient UK technologies market and the recent pick up in momentum across the European mobile phone market.
However, they did note that much hinged on the Christmas trading period and success related to the rumoured iPhone 8 launch in September.
So following Dixon's sudden change of heart regarding the impact that European Union roam-like-at-home legislation would have on it, Credit Suisse took down its estimates for pre-tax profits over its forecast horizon by roughly 22% to £2399m which.
"A c.20% PBT guidance downgrade and rebase of last year's 'headline PBT' (which now excludes one-offs) coming less than two months after prelims at which management seemed relatively sanguine on UK profit prospects does not help confidence," they said.
Assuming Dixons can capitalise on its European momentum with improved growth in its top-line and higher profits from the continental market would leave them squarely in the middle of the company's guidance.
On the upside, the recent share price drop had left the stock changing hands at 6.5 times the company's forward price-to-earnings ratio, which to the Swiss broker looked "cheap" in comparison to its UK retail and electrical peers.
As of 1115 BST, the shares were down by 3.09% to 177.90p.