Equities Update: Currys, Halfords, Micron…

Currys Returns to Profit Growth After Batting Away Acquisition Bid

Mark Crouch, analyst at investment platform eToro, says:  “Currys looks to have been handed a new lease of life in recent months. After being the subject of takeover interest from big hitters in the US and China, the British electricals retailer has since been rejuvenated, this morning reporting a 10% rise in full year profit.

“Currys like-for like sales have returned to growth, so the Group is confident in maintaining this trend for the year ahead, and following the sale of its Greek operations, the business now sits on a strong cash position. Further good news for shareholders is the performance of iD Mobile, which is wholly owned by Currys. Subscribers in the virtual network operator jumped by 34%.

“Following a period where the business was struggling to keep pace with their competition, shares have rallied over 60% since Elliots Investment Group made their bid to acquire the company. Shareholders will take confidence in the fact that not only are companies seeing value in the business, but that, and perhaps boldly, Currys’ board felt confident enough to reject the bid out of hand.

“Fierce competition from online retailers is still a significant threat though, so it might require a change in strategy if Currys is to outmanoeuvre their rivals in the long run.”

Halfords Struggling for Traction as Profits Continue to Fall

Mark Crouch, analyst at investment platform eToro, says: “Halfords’ recent run of poor performance looks set to continue as the bicycle and car products retailer reported another drop in annual profit this morning. Halfords has struggled to gain any traction amidst a cost-of-living crisis that has decimated demand for discretionary spending products, and as a result left companies like Halfords battling to maintain profit forecasts.

“It wasn’t too long ago when Halfords enjoyed something of a bonanza during the COVID pandemic. Consumer spending was rampant during lockdowns with millions of us taking up cycling for which Halfords was there to meet the surge in demand.

“From one extreme to the other, the pendulum has now swung back, putting Halfords in a vulnerable position. The company’s decision to shift focus toward motoring services may have softened the blow, however only slightly.

“Numerous profit warnings will be a major concern to shareholders. And in a period when consumer spending has dried up, the demand for bicycle products and services seems to have all but evaporated.”

Market eyes Micron Technology results for clues on AI growth sustainability

 
Mark Crouch, analyst at investment platform eToro, says: “Computer memory and storage company Micron Technology reports after the market close on Wall Street on Wednesday, offering potential insight into AI demand.

“AI has supercharged the semiconductor industry and we’ve seen a remarkable response in valuations throughout 2024 – Micron’s share price has advanced more than 70% this year, outstripping the S&P 500 index by more than fourfold. Although prices have pushed sharply higher, this is not purely momentum. Advances have been driven by a powerful positive combination of sentiment and fundamentals.

“That all said, we have seen a sizeable pullback in semiconductor stocks recently, evidence that perhaps the market was beginning to question whether an element of overvaluation has crept into proceedings, or at least doubting the sustainability of the growth.

“It will be interesting, therefore, to see what Micron reports about the strength of customer demand and how it sees it going forward. The company highlighted a tightening in the balance between supply and demand in its last earnings call, driven by a combination in burgeoning AI server demand with industry wide reductions in supply. This contributed to sharp rises in high-bandwidth memory and that trend was one of the drivers behind Micron’s strong forward guidance of $6.4 bn to $6.8bn for its fiscal third quarter. A beat on that guidance and further bullishness in its new forward guidance would be a shot in the arm for maintaining price momentum.”