JP Morgan ups target price on 'attractive' Dunelm
By Iain Gilbert
Date: Wednesday 26 Jun 2019
(Sharecast News) - Analysts at JP Morgan bumped up their target price on home furnishing retailer Dunelm up to 785p from their previous 750p watermark on Wednesday, stating the group's shares now fully reflected the strong underlying trends.
Following Dunelm's unscheduled trading update last week, which flagged that recent trading had been ahead of expectations, JP Morgan raised its full-year pre-tax profit forecasts for the group by 3% and 5% for over the next two years, respectively.
"In our view, Dunelm is displaying strong underlying trends and is one of the more attractive equity stories within our UK coverage at present," said JP Morgan.
However, JPM's analyst said they were cognizant that online growth had been "a strong support to the top-line", noting that that particular channel often brought about "incremental costs".
"Furthermore, Dunelm has consistently demonstrated that it is willing to reinvest to support growth. Overall, therefore, we think that there is limited further upside risk to forecasts from here," added JPM.
Combined with the stock being one of the strongest performers year-to-date, up 78% and trading on a 2019/2020 price-earnings of 18.6x/17.6x, JPM now thought Dunelm's shares "fully reflect the strong underlying trends".
The investment bank also reiterated its 'neutral' rating on Dunelm's shares.
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