Broker sees potential for Currys share price to double as 150p target set

Could investors in Currys (CURY) shares make a decent reutrn on their money as we move into the fourth quarter? 

Analyst Adam Tomlinson at Liberum recently maintained a buy recommendation in electrical retailer Currys, setting a 150p price target – shares currently sit at the 62.45p level.

Liberum insists Currys market share opportunity is significant and the shares look good value.

 

Currys share price chart

In his recent research note, Tomlinsion said: “Our recent meeting with Currys highlighted the strategic, operational and financial progress that it has made under its transformation plan.”

He added: “Its international reach, number-one, and growing, market share (25%+) in all territories, and omnichannel model lay the platform for it to be the long-term winner in its vertical, especially as smaller competitors are likely to continue to struggle.

“The wallet share opportunity is ‘significant’, with 80% of UK households shopping there, yet the group takes less than 30% of their spending on electricals.”

‘Currys shares look cheap

Tomlinson argues that the near-term outlook is tough, but that setting the current valuation against the long-term opportunity makes the shares look very cheap.

“With the shares trading on 6.7 times this year’s earnings and the market capitalisation standing at about 65% of the company’s inventory, now is a good time to look,” he said.

Another positive according to Liberum is the successful execution of Currys’ transformation plan since CEO Alex Baldock joined in late 2018, which has made the business more focused and efficient.

Tomlinson concludes: “We think the disruption from COVID and the heavy lifting of the turnaround means that the market is overlooking several of Currys’ key qualities that will make it the long-term winner in its vertical.

“It is an international business; the market is structurally larger;  the group is growing its already leading market share; omnichannel is the right approach; and the balance sheet is much healthier.”

Brighter outlook for Currys share price?

Hargreaves Lansdown also expressed a brighter outlook for Currys when it responded to the electrical retailers full-year results. 

It pointed out that Currys had beaten profit expectations and the outlook for this year was not as bad as the market had envisaged.

The group reported full-year revenue of £10.1bn, in line with last year, and underlying profit before tax of £186m, was ahead of the £155m guided.

At the time Matt Britzman analyst at Hargreaves Lansdown said that a profit beat and positive commentary on supply chains were offset by a murky outlook as inflation looked set to impact discretionary spending and costs across the board were set to keep rising.

“That said, markets reacted positively to the results which is a sign of where we are right now, Britzman explained.

The rise in Currys stock price has yet to happen - despte the mid-summer optmism. 

Marketbeat  currently has a consensus 'hold' rating for Currys  but recently cut the  target price from 125p to 111.25p.

Equity analysts at  Berenberg Bank this week reissued a 'hold' rating but with a much lower price target of 70p.