RBC Capital cuts Dixons Carphone to 'outperform' from 'top pick'
(ShareCast News) - RBC Capital Markets downgraded Dixons Carphone to 'outperform' from 'top pick' and cut the price target to 215p from 225p.
The bank said the stock's valuation is attractive, Dixons has material international exposure -around 30% of profit - and it is gaining share in electricals. However, it faces further mobile headwinds short term which means visibility on earnings per share is low.
RBC argued that in UK mobile, the company is facing a much more challenging outlook than it anticipated earlier this year. In particular, it noted that customer demand is being affected by higher new handset prices and a lack of compelling tech advancement, with customers moving more to post-pay SIM only deals.
"Short term these headwinds are unlikely to ease and so Dixons Carphone is having to invest more in its offer and margin to maintain share."
It added that DC's cash flow may also be impacted by lower profits and negative working capital outflows, which may limit its ability to accelerate cash returns.