JPMorgan Cazenove gave a knock to B&M European Value Retail SA (LON:BME) on Tuesday, downgrading its rating for the stores group to ‘neutral’ from ‘overweight’ as it believes earnings are at risk due to slowing momentum.
The US bank also cut its target price for the FTSE 250-listed stock by 10% to 360p from 400p, now valuing the shares on 15 times 12 months forward PE (price earnings), down from 17 times before.
In morning trade, B&M shares were 0.9% lower at 367.80p.
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In a note to clients, JPMorgan’s analysts said: “Our more cautious stance comes from the softer underlying top-line momentum we see (with tougher comps ahead) and increased margin pressure, which we expect to trigger downgrades to consensus, and some contraction in valuation multiples."
They added: “Upcoming positive catalysts (Germany to be deconsolidated, £150m potential capital return, possibly soon) have already been well flagged and accounted for, we believe.”
The analyst noted that their estimates for B&M are broadly unchanged but sit below consensus for full-year 2019/2020.