Dixons Retail (DXNS)

48.84p

Gain to date: 57%

The market’s negative reaction to Dixons Retail’s (DXNS) interim results (17 Dec) looks overdone. We put the share price dip down to profit taking as fundamentally the FTSE 250 firm’s attractions appear unchanged. The half-year numbers were better than expected and even triggered earnings upgrades from analysts. We can understand why some holders may decide to trim their positions given the cautious outlook statement and how the shares have trebled in value in the past 18 months. Yet this is a self-help story with further to run. Dixons has tough comparative figures to beat and a slowdown in like-for-like sales growth is possible. Nonetheless, Oriel Securities believes share price upside remains and we agree. The broker adds: ‘Dixons is backed by strong cash generation and a more robust balance sheet.’ Cantor Fitzgerald analyst Freddie George notes how Dixons now has dominant market positions in the UK and Scandinavia. He says the £1.8 billion cap will benefit from a ‘relatively-strong product pipeline’, lower interest costs and property losses. George has a 60p price target, which compares to our 31.1p entry price (see Shares, Plays, 11 Apr). (DC)

Lower risk and the potential for growth surprises should help the shares.