Canaccord Genuity still sees long-term upside at Dunelm

(Sharecast News) - A negative reaction to the Dunelm's full-year results hasn't changed Canaccord Genuity's 'buy' rating, with the broker maintaining that the stock still offers "good value". The share price, which dropped 9% on Tuesday, was down a further 2% at 1,095p on Wednesday, indicating 21% upside to Canaccord Genuity's 1,320p target price.

The broker said that, despite a challenging macro backdrop in the UK, results from the homeware retailer showed "further financial progress and market outperformance".

Analyst Mark Photiades pointed out that full-year sales and gross margins were already flagged in a July trading update, while pre-tax profit of £211m - up 2.7% year-on-year - was in line with consensus forecasts.

"Alongside the strong financial performance, the Group continues to make further operational progress as it looks to expand its share of the large and fragmented UK market for homewares and furniture to 10% over the medium term from 7.9% in FY25," Photiades said.

The company, meanwhile, is pleased with its performance so far this new financial year, meaning that Canaccord Genuity has left its £220.5m pre-tax profit forecast unchanged, representing 4.5% growth year-on-year.

"We continue to believe that Dunelm offers an attractive growth opportunity with significant share gain opportunities in under-penetrated categories coupled with further UK and Ireland store expansion potential," Photiades said.