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B&M Stock Dives on J.P. Morgan Warning
19 Oct
Summary
- J.P. Morgan downgraded B&M stock, citing valuation concerns.
- Analyst forecasts anticipate lower sales growth and margins.
- B&M's shares have seen significant gains this year.
Shares of B&M European Value Retail experienced a 3% decline after J.P. Morgan placed the stock on negative catalyst watch. This action precedes the company's half-year results, scheduled for November 12.
J.P. Morgan maintained an "underweight" rating, raising the price target to 201 pence, which suggests a potential 30% decrease in value. The brokerage highlighted that B&M shares have risen approximately 70% this year and 40% in the last three months, now trading at a premium.
The firm disputes consensus forecasts for sustained like-for-like sales growth without margin impact. J.P. Morgan expects progress from B&M's "Back to B&M Basics" plan to be more costly and volatile.
Consequently, J.P. Morgan has revised its forecasts, predicting lower UK like-for-like sales and a decline in gross and operating margins for the first half. Their EBITDA and earnings per share estimates for the second quarter and full year are below consensus.
Past performance includes a 2.3% fall in first-quarter UK like-for-like sales and a 5.3% rise in France. The previous financial year saw second-half earnings per share miss expectations by 20% and adjusted EBITDA decrease by 25.9%. B&M has not provided guidance for the current year, intending to share profit ranges with its half-year results.
