City brokers are evidently divided over discount store operator B&M European Value Retail SA (LSE:BME) following a sharp downgrade to its UK margin outlook and a weaker-than-expected first-half trading update earlier this week.
JP Morgan, in a note, repeated an 'Underweight' rating whilst its analysts flagged “c20% earnings downgrades and 30 to 40% lower FCF expectations.”
The American bank's Lonond-based analysts reckon there's further risks to the turnaround effort, including pressure on space and capital return policy.
Elsewhere, in contrast, Deutsche Bank repeated a 'Buy' rating and 340p target price, with its analysts describing the current valuation (pitched at around 8–9x price-to-earnings) as cheap, and, said the earnings reset was necessary.
DB analysts highlighted that B&M's future profitability will hinge on a return to positive like-for-like sales growth.
B&M itself now expects UK EBITDA margins to be in the range of 9.5 to 10.5%, down from a previous target of 12 to 13%.