Financial Trading Blog
Stock of the day 11/03/2016 – Premier Farnell PLC
Last September saw Premier Farnell post its second profit warning in 2 months, causing the stock to fall around 21% to £1 following the 17.5% drop it had already seen at the end of July. The company had slashed by 40% to 2.6p after its half-year profits plunged 16% to £30.6 million, a move understandably unwelcomed by investors, especially since it was coupled with the caution that the company’s second half performance would likely be ‘lower than previous expectations’.
Premier Farnell managed to rise to £1.15 as October got underway, fuelled by talk of a merger between the company and its tech-rival Electrocomponents; however, speculation soon dissipated and the stock began to fall again, hovering just above the £1 mark by the start of December.
(Source: IT-Finance.com 11/03/2016)
Things then got worse for the Raspberry Pi-manufacturer, a December update sending the stock to an all-time low of 88p after it revealed that 2016 operating profit would be at the lower end of expectations. Its sales figures were more complicated; in continental Europe they grew by 3.7% for the three months to November 1st, but fell by 0.5% when the UK was factored in. Similarly global sales grew by 0.5% per day thanks to growth in the Asia Pacific (up 14.9%, with Chinese sales up 13.8%) region compensating for the UK and the US (the latter seeing sales fall by 6.7%, a worrisome drop given that the region, excluding Brazil, makes up 35% of Premier Farnell’s revenue).
After bouncing from its mid-December lows Premier Farnell entered 2016 at 96p, yet soon fell back to 90p by the end of January thanks to the macro-market turmoil, something that was especially troublesome for the Leeds-based firm given its reliance on China for growth. However, things began to pick up at the start of February, news that the company was selling its Akron Bass business for $224.2 million lifting the stock back above the £1 mark.
Premier Farnell’s rise continued as February turned into March, most recently receiving a boost thanks to the appointment of a permanent CEO after 7 months of searching, Jos Opdeweegh replacing interim chief Mark Whiteling. The stock now sits at a current trading price of £1.20 (IT-Finance.com, 11/03/2016).
Premier Farnell PLC has a consensus rating of ‘Buy’ with an average target price of £1.52.
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