Berenberg raises target price on WH Smith as momentum builds

Analysts at Berenberg raised their target price on retailer WH Smith from 1,900.0p to 2,000.0p on Monday, stating that momentum was now building for the firm.

Berenberg said that following WH Smith's full-year results on 10 November, it had upgraded its earnings per share estimates by 7%, 8%, and 6%, respectively, over the 2023-25 period, driven by both a "stronger-than-expected" post-Covid-19 recovery in trading.

The German bank, which reiterated its 'buy' rating on the stock, also highlighted that WH Smith's store additions for the 2023 trading year had now been guided to a higher level

"Management has guided to 125 new travel store wins, which are set to open in FY23, which represents around 10% growth on the existing base. The largest part of this is in the US, where WH Smith is now expecting to open 70 stores in FY23, which is more than 20% growth on the circa 300 stores at present," said the analysts.

"We believe WH Smith has a significant structural opportunity to take market share in North America in particular, and we feel this store-win momentum could continue for some time."

Berenberg noted that it continues to believe current estimates to be "conservative" and feels that the shares look "increasingly compelling".

"The shares currently trade at 17x August 2023 P/E, falling to 15x 2024E, which is a meaningful discount to the multiple it traded at prior to the pandemic, despite the fact that the mix has shifted in favour of the higher-multiple travel business."

Reporting by Iain Gilbert at Sharecast.com