Dixons Carphone rallies as RBC ups price target on expectations of strong Q4

"We think Electricals trends are robust helped by strong sales of TVs and connected home devices, while the mobile sector remains tough but is no worse," the bank said as it lifted its price target to 230p from 210p.

RBC said the new management team is likely to speed up decision making and improve the customer offer.

"New CEO Alex Baldock (ex Shop Direct) has recently started and has put in place a new senior executive team designed to speed up decision making in the business, cut out unnecessary layers of management and improve the customer offer for instance by improving data analytics and mobile conversion," RBC said.

In addition, it reckons post-Brexit currency headwinds have subsided. It noted that Dixons has suffered from manufacturers raising prices aggressively following the devaluation of the pound in 2016 but said this has now annualised and it’s seeing more competitive prices coming through in areas like laptops and iPads, which should be helpful for volumes.

RBC said Dixons has a very strong market position in the UK and Northern Europe and should show strong momentum in consumer electronics heading into the new financial year. Meanwhile, its smaller mobile business is still facing challenging industry headwinds but the group should manage the cost base down and lower its working capital intensity over time.

"DC should also benefit from further cost savings in the UK (e.g., lower rents) and from new warehousing in the Nordic area" RBC said.

The bank expects Dixons’ FY results next month to show evidence of strong recent trading in electricals.

At 0915 BST, the shares were up 5.6% to 216p.