Halfords (GB:HFD) shares plunged this week after broker Panmore Gordon issued a warning over the iconic British company – downgrading the stock to ‘Hold’ from ‘Buy’ and slashing its price target in half.
Panmure Gordon said, “As one of the most operationally and financially geared operators in our coverage universe, Halfords (HFD) is naturally at some risk coming into the period of significantly increased pressure on consumer spending in 2022.”
Halfords stock plunged to lows of 124.2p, before recovering slightly to 130.6p.
Why are Halfords shares dropping?
With inflation squeezing finances in Britain, Halfords retail division – which sells bikes, scooters and accessories – was ‘exposed’, the broker said.
Halfords’ motoring business – which includes breakdown cover and servicing – now accounts for 70% of group revenue.
Panmure Gordon said that it was reducing its target price in advance of Halfords’ trading update which is due on September 7.
It said, “We are reducing our forecasts marginally ahead of the 7th September trading update and neutralising our target price (50% cut) and recommendation.
“We believe that there is significant upside in HFD and that it is unlikely to go bust, however harsh the coming winter is for UK retailers. But we prefer to wait for better visibility.”
View from the City
Previous to Panmure Gordon’s analysis this week, according to TipRanks’ analyst rating consensus, Halfords stock was a Moderate Buy, based on one Buy rating from analyst Manjari Dhar at RBC capital.
The average price target is 190p, which shows an increase of 45.48% on the current price.
Conclusion
This analysis has spooked investors: all eyes will be on Halfords results due next month.
