Dixons Carphone PLC (LON:DC.) faces macro headwinds and the valuation is “more up with events”, said broker RBS as it downgraded the stock.

The new rating is “sector perform”, down from “outperform”. The target price is 150p.

“We expect Dixons Carphone to maintain its strong relative position in the electricals segment (c.25% share in the UK, c.27% in the Nordics), despite strong competition from online players, helped by initiatives like its “Shop Live” proposition and 1 hour Click and Collect. There has been a general constraint in the supply of product, as suppliers have had to work hard to meet the global demand for electricals, and we think DC’s market-leading position has been a benefit in terms of access to inventory,” RBC said.

That being said, in terms of comparison with numbers from a year ago, the company is running into tougher comparatives. Furthermore, given its low margins, the retailer might be disproportionately affected later this year by higher taxes on consumers and the end to the stamp duty holiday on houses, which is currently engendering a feelgood factor for many homeowners.

With the travel sector knocked for six by the pandemic, RBS wonders whether Dixons is contemplating exiting from the high-rent Travel sector, leaving the way open to other retailers that are more committed to the airport channel.

As for its troublesome mobile phones business, RBC thinks the division still has the potential to hit a break-even run rate by the end of the year to April 2022, thanks to cost savings.

By RBC’s calculation, the stock now trades on just over six times forecast enterprise value/EBITDAR, which is close to its historical average.

Shares in Dixons Carphone currently trade at 143.9p, down 1.1% on the day.

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