Should you Book Profit on this Consumer Stock: Lookers PLC?

Lookers PLC

Lookers PLC (LON: LOOK) is an FTSE All-Share listed company that provides motor retail and aftersales services.  

Investment Rationale – SELL at GBX 95.30

• Profit Booking: Lookers’ share price has jumped over 16.95% in the past five days, and therefore, investors can book profit as per their risk-return profile.
• Impact of Semi-Conductor Shortage: The company faced the challenge of global shortage of semiconductors during Q4FY21 and reported that like-for-like used vehicle unit sales were down by ~14.2% during the period.
• Macroeconomic Concerns: The present uncertain macro environment owing to COVID-19 poses a threat to the recovery in the economy and coupled with geopolitical tensions might derail the momentum of equity markets during the year.
• Technical Indicator: The price of the stock has reached near upper Bollinger price bands, with a 14-day RSI level of 62.66, reflecting into overbought territory.

One Year Share Price Chart

(Source: Refinitiv, Analysis conducted by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY22) (Illustrative)

* Peers: Next PLC, Motorpoint Group PLC, and Superdry PLC.

*All peers are LSE-listed Companies from the Consumer Discretionary sector.

 Conclusion

Based on the attractive notional gains in the short-term, macroeconomic instabilities, semiconductor shortages, coupled with the unfavourable Valuation conducted above, we have given a "SELL" recommendation on Lookers PLC at the current market price of GBX 95.30 (as of 22 March 2022, at 11:36 AM GMT). 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and is subject to the factors discussed above.

Note 3: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 4: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Note 5: Dividend Yield may vary as per the stock price movement.

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