RBC Capital Markets upgrades Currys to 'outperform'

(Sharecast News) - RBC Capital Markets upgraded Currys on Tuesday to 'outperform' from 'sector perform' and lifted the price target to 180p from 165p as it pointed to an attractive valuation and the potential for further share gains.

The bank said Currys is transitioning from being a recovery play to a likely multiyear compounder with strong cash returns.

"Its strong relative position should allow for further share gains, and growth in higher margin services and adjacent categories," RBC said, adding that it was raising its earnings per share forecasts and medium-term margin assumptions slightly.

RBC noted that in the UK & Ireland, Currys has seen continued good trading with clear market share gains. In the past year it has seen strong sales in mobile alongside growth in computing and appliances, helped by its strong omnichannel proposition, including order & collect sales, the bank said.

"It has also seen good growth in recurring service revenues, credit adoption up +200bps to 25% and strong growth in B2B and newer categories e.g. eco products, home & family and health & wellness."

The bank said like-for-like sales growth and a stable gross margin have more than offset cost headwinds.

In the Nordics, Currys has a dominant number one position in each market, RBC said. Key focus areas in the Nordics are B2B, gaming and kitchens.

"We expect TV sales to have picked up recently, with both Sweden and Norway in the World Cup, and we see further scope for increased services and add-ons to help drive margin."

RBC pointed out that Currys is trading at 10.5x CY26 estimated price-to-earnings and has a 2% dividend yield, which it thinks is reasonable, given its stronger recent execution and balance sheet, with the main risks being macro related.

At 1305 BST, the shares were up 2.3% at 153.70p.