Goldman starts Dixons Carphone at 'neutral', sees limited scope for re-rating

Goldman Sachs has initiated coverage of Dixons Carphone at ‘neutral’ with a 350p 12-month price target, saying the company is well-positioned in the medium term to deal with the structural challenges it faces.

The bank said that its full-year pre-tax profit estimate for 2018 is broadly in line with consensus and a near-term re-rating is unlikely in the absence of catalysts , especially given the continuing overhang from an uncertain UK outlook, hence the ‘neutral’ stance.

GS said progress on pricing and suppliers’ support should help sustain market share in electricals in the face of pure-play competition, while continuing subscriber momentum should limit disintermediation risk in UK mobile.

“Progress on pricing, closer relationships with suppliers (with Dixons’ stores effectively acting as a display and distribution channel for electrical suppliers) and a solid distribution and service network, combined with ongoing share losses at smaller independents, should support stable to modestly rising market share for Dixons in UK electricals. Overall, we forecast circa 2% underlying top-line growth for the UK and Nordics electricals businesses mid-term.”

At 1155 GMT, the shares were down 0.8% to 313.30p.