Broker tips: Bytes Technology, Dunelm, Wickes

(Sharecast News) - Bytes Technology won an upgrade from Berenberg on Friday, with the broker lifting its recommendation from 'hold' to 'buy' and raising its target price sharply from 360p to 520p after a strongerthanexpected firsthalf update and improved guidance.

Berenberg said Bytes delivered an "impressive" H127 performance, with gross invoiced income rising 19% year-on-year, well ahead of consensus, while gross profits grew 18%, also beating expectations, supported by demand across software, cloud and security. Operating profits increased 6%, ahead of the 1% consensus estimate, despite higher technology costs and normalised bonus levels.

The German bank said Bytes' upgraded FY27 guidance looked "more than achievable", with the firm now expecting lowtomidteens growth in gross profits versus its previous highsingledigit to lowdoubledigit range. Operating profit was now expected to grow in the lowtomid single digits rather than remain broadly flat.

Berenberg said the strong momentum was particularly reassuring given the disruption caused by changes to Bytes' corporate sales model and the headwind from Microsoft's incentivestructure changes. It raised its gross profit forecasts for FY27, FY28 and FY29 by 6%, 9% and 12%, respectively, and lifted operating profit forecasts by 7%, 10% and 15%.

The broker added that while several senior appointments were still awaited, Bytes had "regained momentum", prompting the upgrade to buy and the new target price.

Analysts at Shore Capital upgraded their view on Dunelm on Friday, arguing that the sharp shareprice reaction to the retailer's new strategy was overdone despite the scale and cost of the planned investment programme.

Shore Capital said Dunelm's refreshed plan was ambitious and carried execution risk, but aimed squarely at restoring midtohigh singledigit annual sales growth through faster store openings, estate renewals, technology upgrades and a stronger digital offer.

While the nearterm tradeoff was clear - including restructuring charges, higher capex, margin pressure and a likely pause in special dividends - Shore Capital said early trials pointed to genuine topline benefits.

Dunelm's fullyear results were broadly in line, but softer early trading in FY27 underlined the challenge of low growth and persistent cost inflation. Management's response, Shore Capital said, was a multiyear investment push designed to reinforce Dunelm's position in a fragmented homewares market, where it still holds only around 8% share.

Shore Capital said investment will weigh on margins, with the broker expecting them to drift towards 11% and free cash flow to weaken. However, it said Dunelm's disciplined track record and the contribution from an accelerated store rollout should help profits recover once the initial dilution passes.

With the shares trading on a singledigit forward earnings multiple and offering a yield of around 6%, Shore Capital said the market was giving too little credit to the mediumterm growth potential. It reiterated its 'buy' rating and kept its 1,000p target price.

Deutsche Bank upgraded Wickes to 'hold' from 'sell' on Friday and lifted its price target on the stock to 210p from 165p, saying it believes the downside risk to earnings is mitigated by better current trading and a growing pipeline of projects.

"Weaker big ticket demand remains a cyclical headwind, while rising inflation is unhelpful for consumer confidence," the bank said. "However, we like the Wickes business model, management team and value-focused brand positioning. We therefore anticipate further share gains within a tough market."

Deutsche said guidance implies around 20% pre-tax profit growth in the second half, but stated this was supported by better like-for-like sales and further cost savings. DB also noted that the shares were down 18% year-to-date and currently trade on an 10.8x estimated CY26 price-to-earnings ratio, compared to B&Q owner Kingfisher on 11.4x.