One of Germany’s perennial stock market underperformers got its first buy rating in almost a year — just after slumping on a disappointing quarterly report.
(Bloomberg) — One of Germany’s perennial stock market underperformers got its first buy rating in almost a year — just after slumping on a disappointing quarterly report.
Metro AG jumped as much as 7% on Monday, regaining nearly all of Friday’s results-related losses, after SRH AlsterResearch’s Alexander Zienkowicz upgraded the stock from hold. His unchanged 12-month price target of €8.20 implies a 17% gain from Friday’s close.
“Third-quarter numbers reflected the challenging business environment in the backdrop of weak consumer demand,” Zienkowicz wrote in a note. Despite the cash and carry firm’s sales miss, the analyst was positive on the progress Metro has made in streamlining its portfolio, which should allow the company to focus on “more favorable” markets.
Metro has been a dismal performer since separating from consumer-electronics group Ceconomy AG in July 2017, falling 58% while Germany’s CDAX Index has risen 21%. The company’s market value has shrunk to €2.7 billion from €6.7 billion in that time.
Zienkowicz aside, the stock has seven hold recommendations and four sells, while the average price target implies less than 4% upside, according to data compiled by Bloomberg.
According to Charles Allen, an analyst at Bloomberg Intelligence, Metro faces near-term challenges from higher inflation and lower consumer confidence, which affects its margins. Previously high-margin Russia is also making a lower contribution, he wrote.
–With assistance from Lars Mucklejohn.
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