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Broker tips: Dixons Carphone, WHSmith, BT

By Iain Gilbert

Date: Friday 16 Apr 2021

Broker tips: Dixons Carphone, WHSmith, BT

(Sharecast News) - RBC Capital Markets downgraded Dixons Carphone on Friday after a recent strong run but upgraded its stance on shares of WHSmith.
The bank cut Dixons to 'sector perform' from 'outperform', maintaining the price target at 150.0p.

"We expect Dixons Carphone to consolidate its market-leading position in electricals and to manage down its losses in mobile," RBC said. "However tougher comps and potential macro headwinds are ahead, and following a good run by the shares we now think they are closer to fair value."

The bank upgraded WHSmith to 'outperform' from 'sector perform' and lifted the price target to 2,200.0p from 2,100.0p as it argued the retailer's international markets are providing an encouraging precedent for a recovery in UK travel demand.

RBC said it expects WHSmith's relative position to strengthen after the pandemic.

"Meanwhile WHSmith's High Street business is proving more resilient than we expected, helped by the high-growth Funky Pigeon business," it added.

BT's downgrade cycle is in the past and a 'major rerating' is called for, JP Morgan said as the bank increased its price target for the telecoms group's shares and reiterated its 'overweight' rating.

The FTSE 100 company has suffered major downgrades over the past five years but Openreach, its network division, will power upgrades as earnings surge, JP Morgan said.

"Whilst such growth might seem heroic, note this simply restores EFCF back to levels last seen as recently as in 2017," JP Morgan said.

JPM increased its price target for BT shares to 230.0p from 175.0p based on an increased forecast of 19.31p earnings per share for 2022 and a £22.0bn sum of the parts valuation for Openreach. Though BT shares have gained 50% since October as investors have woken up to its prospects the shares are still 70% below their 2016 high of £5 a share, he added.

JPM said catalysts for the shares to make gains include annual results, a pension update and lower costs in a Premiership rights auction. But he said a substantial rerating needs BT to convince investors of the long-term upside from fibre.

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