Is it irrelevant, or will the Upgrade make the Dunelm share price more attractive?

• The chart shows the Dunelm share price since mid-May.
• Peel Hunt has upgraded its rating to Buy and increased the target price to 750p (from 620.5p).
• Consensus summary: 4 Buys, 4 Holds, 4 Sell; Average target: 580p (Source: Bloomberg).
• Current share price 608p (at time of writing).
• 3 Dec: Analysts at Peel Hunt say that Dunelm has strong foundations including 10%+ pre-tax earnings margins, a 15% return on capital employed and a 10% free cash flow yield.
• Shares -24.25% from 2018 highs; +17.7% from 2018 lows; -12% year-to date
• Source: Bloomberg, FT, Reuters, DJ Newswires, AlphaTerminal

Click to enlarge

Trading Dunelm – An Example

Let’s say you think that Dunelm shares have upside potential as result of this broker upgrade. You decide to buy exposure to £10,000 worth of Dunelm using a CFD, at the current price of 608p. To do this, you need £2,000.

For the purpose of this example, let’s assume the Dunelm share price rises to mid-May high of 643p (+5.7%). Your profit would be £570 from your initial investment of £2,000.

Conversely, let’s assume you open the above position, and place a stop-loss at 3% from the current price. Dunelm shares continue their downtrend, they fall 3% and hit your stop-loss. Your loss would be £300.

This is provided for information purposes only. It should not be taken as a recommendation.