Dixons on fire following Comet's fall

published 30 November 2012

Electronics retailer Dixons continues to rise on expectations that it will be one of the beneficiaries from Comet's demise, fuelled by 'buy' notes from brokers.

Today, Seymour Pierce increased issued a note, reiterating its 'buy' recommendation and raising its price target from 26p to 35p.

Respected retail analyst Philip Dorgan, at house broker Panmure Gordon, raised his price target from 28p to 32p in a note issued on Thursday, following strong interims for the High Street face. Dorgan estimated that the demise of Comet might add £30m to earnings before interest and tax.

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He also commented: "At this level, we think that the shares value the loss-making Southern European and PIXmania businesses at minus £300m. Beyond our target price of 32p, the next leg in the share price performance therefore depends upon management creating value in these businesses, either through profit turnaround or disposal.

"On our estimates, the price earnings ratio is 25 times for full year 2013 and 10.1 times for the year after. If 100% of the management's employee stock ownership plan is to vest, then Dixons trades at 7.5 times full year 2015 earnings."

At midday on Friday, the shares were up 5.47% at 27.16p.