Dunelm Group plc (LON:DNLM) shares rose on Friday after UBS upgraded the stock to ‘buy’ from ‘neutral’ based on future growth expectations, keeping a 930p price target.
The homewares retailer reported weak numbers in September due to exceptionally hot weather, although industry data suggested an October rebound, according to the broker.
READ: RBC deems Dunelm Group “winner” in tough UK market
The FTSE 250-listed firm has been focusing on its digital presence and will launch a new commercial platform before Christmas, although it said last month it will “retain flexibility” with the transition plans.
“Dunelm is on the cusp of delivering a step-change in its multi-channel capabilities positioning it well for future online growth,” the Swiss bank's analysts said in a note, adding that consensus figures were “too conservative”.
They noted that the market is pricing into the shares a 2% compound annual growth rate and an underlying earnings margin of 9% by 2024, while UBS placed its bet at 3.8% and 11.9% respectively.
Dunelm shares were up 3% to 788.5p on Friday morning.