Liberum Capital has removed its ‘sell’ stance on Pets at Home PLC (LON:PETS), upgrading its rating to ‘hold’, albeit with an unchanged target price of 120p, with the stock having dropped by 53% in value since the City broker turned negative on 5 July 2016.
Pets at Home shares were nearly 11% higher in late morning trading on Friday at 125.5p after reporting higher revenue in the first few months of the financial year as price cuts and instore vets lure in more customers.
READ: Pets at Home shares surge as price cuts and instore vets boost revenues
In a note to clients, Liberum’s analysts pointed out that the FTSE 250-listed firm reported a fourth consecutive quarter of like-for-like sales growth of more than 5% and although full-year forecasts remain unchanged, they think this raises questions around whether earnings have troughed.
The analysts said, considering the group’s price earnings stands at 8.6 times, they feel the group’s “risk/reward profile may have shifted”.
They added: “We balance this more positive recommendation with continued areas of caution including 1) strong competitive pricing pressure 2) continued risks around gross margin, 3) a tough outlook in Vets and 4) a cash exhaustive vets model.”