The investment banking arm of High Street lender HSBC has gone to ‘hold’ from ‘buy’ on the stock, which it reckons is worth 200p, down from 410p before the alert.
In early morning trading today, after sliding around 20% yesterday, Dixons Carphone shares on the FTSE 250 index were down another 2%, or 4.3p at 176.5p this morning.
Dixons hit the investing public with a major downgrade to earnings, which it now forecasts to be in the range £360-£440mln, compared with consensus estimates pitched at around £500mln previously.
The nub of the problem was the impact of European Union roaming legislation on the Carphone Warehouse portion of the business although the company faces other problems too.
It is investing in margins (cutting prices) to defend its position in the mobile phone market.
The outlook for the Dixons electricals business looks ‘tough’, with a worsening outlook for consumer spending, HSBC said.
Finally, the launch of the new iPhone is unlikely to set the world alight (or alter the retailer’s fortunes), the bank added.
It reckons sales are more likely to be nearer those of the 6S model than the hugely successful iPhone 6.
The key issue going forward is credibility “given such a large downgrade comes so soon after full-year results”, HSBC concluded.
It also wonders whether the issue with the mobile phone business are structural (ie. hint at a long-term decline) or merely cyclical.
Liberum keeps its 'buy' stance
Meanwhile, analysts at Liberum Capital, which yesterday placed their rating and price target under review for Dixons in the wake of the profit warning, have kept their 'buy' rating on the stock while chopping their price target back to 300p from 430p.
In a note to clients, the Liberum analysts noted that Dixons shares “now trade on a CY17E PER of 6.4x and we believe the low valuation more than compensates.”
They added: “There is support from a 5%+ div. yield, where there is upside potential, and a healthy balance sheet with under 0.5x leverage.”