On Tuesday, Deutsche Bank (ETR:DBKGn) shifted its stance on Currys Plc (LON:CURY:LN), raising the stock from Hold to Buy and increasing the price target to £0.95 from £0.80.
The upgrade follows Currys' strategic initiatives during the fiscal year 2024, which focused on cash preservation, balance sheet stabilization, and margin protection amid soft demand for its products.
The firm's analyst highlighted that Currys' self-help measures have positioned the company to potentially benefit from an uptick in demand for electricals. This comes as consumer confidence shows signs of improvement, and the possibility of a new cycle of electronics purchases emerges, four years after the initial surge during the COVID-19 pandemic.
According to Deutsche Bank, Currys' disciplined investment approach and reduced cash interest burden could lead to significant earnings growth. A 1% increase in like-for-like (LFL) sales growth is projected to translate into a 13% rise in earnings per share (EPS) compared to the base case. The firm is modeling for a 1.5% LFL and a 20% EPS growth for the fiscal year 2025 estimate (FY25e).
The analyst also pointed out that Currys' financial position appears more robust, with a net cash of £98 million recorded for FY24 and an improved free cash flow (FCF) generation. This financial stability may pave the way for Currys to resume dividend payments.
Finally, the valuation of Currys' shares at 7.5 times the calendar year 2025 price-to-earnings (PE) ratio was cited as an attractive risk-reward proposition for investors, supporting the rationale behind the upgrade.
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