Stock of the day 11/12/2015 – Dixons Carphone PLC

Despite hitting fresh highs it hasn’t been the most consistent year for Dixons Carphone, the stock losing momentum almost as often as it has gained it.

Yet the company currently finds itself on an upward swing – can that continue with its interim 2016 results next Wednesday?

Although labelled a ‘roller-coaster’ by CEO Sebastian James (likely due to the sales-warping effects of Black Friday), Dixons Carphone’s Christmas period saw a 7% rise in like-for-like sales, leading the company to upgrade its full year profit expectations to £375 million. Not that this stalled the company’s early-in-the-year fall, the stock dropping from a 2015 starting price of £4.65 to £4.14 by the start of February.

A bounce-back to £4.50 by the end of February was soon lost across March, falling back to £4.10 by the start of April only to see the same rise and fall pattern between mid-April and the start of May. The Tory election win then finally saw Dixons Carphone break out of its £4.10 to £4.40 trading bracket, sending it to an all-time high of £4.85 at the start of June.


(Source: IT-Finance.com 11/12/2015)

Its Q4 results at the start of that month once again saw the company state it would outperform its already upgraded profit targets after seeing a 9% jump in revenue, before announcing at the start of July that it would be expanding into the US with 500 stores in a joint venture with Sprint. Yet neither of these factors could stall its fall, the stock hitting £4.40 as the mid-year fears surrounding the potential exit of Greece (where Dixons Carphone is the largest electricals retailer) from the Eurozone set in.

Things picked up again in mid-July as the company announced a 21% rise in pre-tax profits to £381 million, only for any nascent form to be lost as the market turmoil of August got underway. The China-inspired chaos of that month led Dixons Carphone all the way to a year low of £4.02 by the end of September, even with a first quarter 2015/16 report that showed an 8% increase in like-for-like group revenue.

Yet once the dust had settled on those China issues Dixons Carphone could resume something of a more sustained climb, going from £4.30 on the 21st October to a fresh all-time peak of £4.91 on the 1st December. The stock now sits at a current trading price of £4.75 (IT-Finance.com, 11/12/2015).

In terms of its interim results next Wednesday Barclays stated this week that it expects ‘a robust set of figures’, especially from the UK division, but with the chance of a slighter weaker performance from its Nordic and southern European stores. The stock may also benefit from a comment on its Black Friday numbers, as well as any update on its US expansion.

Dixons Carphone PLC has a consensus rating of ‘Buy’ with an average target price of £5.26.