Berenberg ups Halfords to 'hold', says concerns are now priced in

Berenberg lifted its recommendation on Halfords to ‘hold’ from ‘sell’ but cut the price target to 375p from 430p to reflect the company’s updated guidance.

The bank pointed out that Halfords shares are down around 30% since its ‘Three reasons to sell’ note, published on 3 August.

At the interim results last week, management set out its strategy for the mid-term, re-setting market expectations.

After three years of 6-8% growth in the cycling market, management has tempered expectations, guiding to around 3-5% market growth going forward.

“While we continue to believe Halfords’ weakness in cycling is structural as well as cyclical, we also believe that top-line expectations are now more realistic,” it said.

The pressure on profitability from the increasing cycling mix and service-led strategy has also been recognised, with management guiding to a broadly flat EBITDA margin in the mid-term.

“As such, we believe the cost of the current strategy is now largely priced in.”

At 1100 GMT, Halfords shares were 0.5% lower at 388p.