At the end of May I highlighted Pets At Home (LSE: PETS) and Dixons Carphone (LSE:DC) as stocks offering decent upside. So far both picks have performed well and I give an update below.
Out of the dog House
Pets at Home had a share price of £1.62 at the time of writing my original piece and a P/E of just 10.8. The share price has just hit £2.19 giving a decent return of over 35% plus a summer dividend yield of 5%. Not bad, but is it time to take some profit?
From a technical analysis viewpoint, PETS’ share price has broken out of its downward channel, and a close above £2.20 would indicate the possibility of it moving toward next resistance at £2.38 or even my long-term target of £2.70. Fundamentally, the company is on track to meet its projections this year, and I think many overlooked just how focussed PETS are on the services element of their operations. It’s easy to tar retailers with expensive shop fronts to maintain with the same ‘doom brush’ in these web-orientated times. However, in a country of pet lovers, it’s beginning to look like Pets At Home have indeed won the love of pet owners through their veterinary and grooming services. For the more cautious among us, it may be time to consider taking some off the table after such a good run. The RSI has crept back into overbought territory, but there may well be significantly more to come with continued progress. We’ll know more on the 28th November when the interims are announced.
Dog and Bone
Another retailer I covered more recently, just two weeks ago in fact, is Dixons Carphone. Its share price has been taking a hammering since the beginning of 2016, falling from a peak of £5.00 to a low of £1.55 after a profit warning in September. Reasons given for the profit slump in the mobile phone sector of the business were primarily currency fluctuations and a dulling of consumer urgency to upgrade phones.
Many cited the new iPhone as a possible catalyst but I’m not convinced the new models have significantly ignited the market, however the recent rise in the Pound may well have tipped the balance back in the favour of the predominantly UK-based retailer. As with Pets At Home, the Dixons Carphone group has been building its services activities and these now account for more than half of their revenue. Poor sentiment has dragged the share price excessively down in both cases, and I believe there is also further scope for the short-term recovery of the Dixons share price too. I have my eye on the £2.20-2.40 range at which point I’ll review my holding.
