This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
Despite strong financial results, Computacenter has suffered from this week’s FTSE bloodbath with a 12 per cent share price fall after it posted a note about the potential impact of coronavirus.
The computer services group posted great results for 2019 – pre-tax profit jumped by 30.4 per cent to £141m and revenue increased by 16.01 per cent to £5,052.8m. France and Germany were particularly strong, with French revenue jumping 15.7 per cent and German revenue climbing 5.2 per cent which offset some weakness in the UK market, which saw a revenue decrease of 1.8 per cent.
Computacenter Chief Executive, Mike Norris, cautioned about the impact of coronavirus though saying: “To-date, supply constraints from our technology providers have been minimal, although there are some concerns going forward. We do however have some concerns that in the medium-term, customers may postpone significant IT infrastructure projects while the current uncertainty remains.”
The current situation has taken the sheen off most stocks this week but are Computacenter poised to bounce back considering this latest financial update?
Norris did point out that coronavirus had provided a ‘shot in the arm’ for laptop sales in the last few days as companies started to stockpile in anticipation of imposing home working. While Computacenter’s stock has fallen around 30 per cent since its peak in February, its share price is around 250 per cent higher than it was ten years ago. It also has a history of strong cash performance and steady dividend income, with a forward-looking dividend yield of 2.7 per cent for 2020, so although the impact of the current situation is hard to measure, many see it as one of the stocks that could deliver long-term growth.
Cineworld has become a casualty of the coronavirus breakout, revealing that the pandemic could put it out of business, send its shares tumbling to a ten-year low.
Share prices slumped 32 per cent, to 67p at the time of writing, in the wake of the warning and the cinema chain’s full-year results.
Aside from coronavirus, the results were gloomy with admissions falling 10.8 per cent to 275m in the year to the end of December, and revenues falling 6.2 per cent to around $437 bn.
The cinema giant, which was already facing uncertainty about upcoming releases such as the new James Bond film, said in a worst-case scenario it could lose as much as three months revenue due to widespread cinema closures. It indicated this could leave it unable to service its $3.6 bn debt and revolving credit facility of $462.5m although Chief Executive Mooky Greidinger said the firm had not spoken to lenders about emergency liquidity as yet. He went on to say that while coronavirus had had little material impact so far “there can be no certainty on its future impact on our activities, hence we are taking measures to ensure that we are prepared for all possible eventualities.”
Despite the doom and gloom, Peel Hunt has retained its hold rating and target price of 140p, saying that it believed the effect of coronavirus would be “short-lived and that the business will trade through it without additional financing”, although they went on to add that uncertainty was “likely to persist for some time”.
Others were less pragmatic though – Natasha Brilliant at Citigroup said: “The leverage is a huge issue; it all comes down to this issue of covenants and liquidity. They talk about the next three months but potentially the impact of coronavirus might be longer than that.”
Unsurprisingly, travel companies and airlines have taken a huge hit since Trump announced the US travel ban and EasyJet is no exception with share prices plummeting more than six percent to 832.31p at the time of writing.
Some analysts are optimistic about EasyJet though, suggesting that the current slump could be a good time to snap up the stock. UBS double upgraded the airline’s shares on Wednesday from ‘sell’ to ’buy’ and raised its target price to 1,300p despite EasyJet’s share price falling more than 30 per cent since the start of the year.
The analysts were optimistic about the carrier’s ‘more balanced risk/reward’ and the possibility of other sector bankruptcies removing capacity.
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance.