(Sharecast News) - Peel Hunt upgraded WH Smith to 'buy' from 'hold' on Wednesday and bumped the target price up to 2,100p from 1,950p as it said the acquisition of US airport retailer InMotion is dial mover and highlighted "surprisingly strong" current trading.
"Our knee-jerk reaction to the InMotion (IM) deal was upbeat and, the more that we look at it strategically, the more excited we become," said Peel.
"A glance at the passengers on any form of transport suggests that two trends are rampant: athleisure and digital accessories.
WH Smith is tapping into demand for the latter in the biggest travel retail market of all with this EPS-enhancing acquisition.
It is the wider strategic opportunity that gets us really excited though: IM's relationships with landlords can unlock the door to WH Smith Travel's core format appearing in the US, and its infrastructure has capacity to help out too." In addition, the brokerage said that InMotion is a format that will travel in WH Smith's hands. Peel Hunt pointed out that while the shares reacted well to the deal, they didn't re-rate.
It said that after a long period "under a cloud", and with a strong current trading statement alongside the deal, that's a "stingy" reaction. WH Smith said on Tuesday that it was buying InMotion for $198m (£155m).
It also reported that eight weeks into the current financial year, travel total revenue was up 10%, with like-for-like revenue 4% higher.
Total revenue for the group was up 5% with like-for-like sales increasing by 1%. InMotion is the largest airport-based digital accessories retailer in North America with 114 stores across 43 airports.
It sells items such as headphones, travel accessories, mobile power, portable speakers and action cameras. At 1125 GMT, the shares were up 6.7% to 1,942p.
Investors should be aware that past performance is not a reliable indicator of future results and that the price of shares and other investments, may fall as well as rise and the amount realised may be less than the original sum invested.
Walker Crips Group plc (Old Change House, 128 Queen Victoria Street, London EC4V 4BJ), registered in England, registered number 1432059, incorporates the following companies which are authorised and regulated by the Financial Conduct Authority: Walker Crips Investment Management Limited registered in England number 4774117 member of the London Stock Exchange, Walker Crips Wealth Management Limited registered in England number 3790291, Ebor Trustees Limited registered in England number 3514268, Barker Poland Asset Management LLP registered in England and Wales number OC341149.