Kingfisher PLC (LSE:KGF) concerns are “overdone,” says Barclays, which initiated its analysis on the B&Q owner with an overweight rating and a target price of 350p.
Analysts noted that Kingfisher is the “most crowded short” in European retail and the sixth most crowded short stock in any European sector.
Barclays believes the negative sentiment surrounding the stock is built on three reasons.
A difficult outlook for consumer spending on home improvement as a result of the cost-of-living crisis and slowdown in property markets, higher operating costs and a hangover from the ‘One Kingfisher’ years are the reason behind the negative sentiment, said the broker.
However, Barclays believes each concern is exaggerated and still sees attractive share price upside potential.
Data suggests home improvement spending, which makes up more than 50% of Kingfisher’s sales, is holding up in the UK, while the challenging cost outlook has moderated since last Autumn.
Barclays said in the case its forecasts prove “insufficiently cautious,” the bank believes earnings downside is limited thanks to Kingfisher’s robust balance sheet.
“We think Kingfisher presents a positive story- a business we see now as well managed and well positioned in its key markets.”
“Screwfix is a very dynamic model with further growth in the UK and significant potential in new markets.”
Kingfisher is also in a strong position to grow in Poland, while its French business is on track, the broker said.
Shares are currently changing hands at 290p as of mid-afternoon.