Canaccord Genuity lowers target price on Marks Electrical

Analysts at Canaccord Genuity lowered their target price on online retailer Marks Electrical from 123.0p to 100.0p on Wednesday, citing short-term product margin pressure.

Canaccord Genuity noted that Marks Electrical's recent trading update had outlined strong top-line growth of roughly 17.8% for Q3 and 22% year-to-date, slightly stronger than its expectations. However, it also pointed out that despite the "strong top-line growth", gross product margins had disappointed, negatively impacted by a continued drop in consumer trading, against a strong comparative in the first half.

As a result, management now expects full-year revenues of between £115.0m-118.0m and underlying earnings between £5.0m-6.0m.

"Following today's update, we maintain revenue estimates but downgrade our FY24E and FY25E EBITDA estimates by 38% and 28%, respectively. While today's update is disappointing, we believe it reflects short-term macroeconomic headwinds that are outside of management's control, while the business continues to take market share and maintain excellent customer service and cost discipline," said Canaccord.

The Canadian bank, which reiterated its 'buy' rating on the stock, also believes the long-term story for Marks "remains intact", yet, short-term, the shares were likely to "see pressure" given the "sizeable downgrades".

Reporting by Iain Gilbert at Sharecast.com