On Friday, Berenberg reaffirmed its confidence in Card Factory plc (CARD:LN), maintaining a Buy rating and a price target of £1.54 for the retail chain's shares. The endorsement comes despite the stock's significant decline following the company's interim results released in late September. The analyst pointed out that the 40% drop in share price since the report appeared excessive.
According to the firm, the first-half results were anticipated by management, and there was prior communication about an expected heavier second-half profit weighting. Despite the need for a more challenging 22%/78% first-half/second-half profit split to meet the full-year consensus expectations, the analyst believes the company's full-year guidance remains achievable.
The analyst also noted that there has been no revision to the full-year guidance, which supports the view that the company is still on track to meet its targets. The current valuation of Card Factory's shares is considered to be undervalued, especially when looking ahead to the potential impact of the company's recent expansion into the U.S. market.
The firm further commented on the potential for Card Factory's U.S. venture to be a game-changer for the business. This move, along with steady progress toward the fiscal year 2027 targets, is expected to make the current share valuation seem even more attractive.
In summary, despite the recent drop in share price and the pressure to deliver a significant portion of profits in the latter half of the year, Berenberg stands by its Buy rating for Card Factory. The firm's analysis suggests that the retailer's strategic initiatives, including its U.S. market entry, could contribute to a positive reassessment of the stock's value in the near future.
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