JPMorgan upgraded homeware retailer Dunelm Group Plc on Wednesday to 'overweight' from 'neutral' as it said the risk has shifted to the upside.
The bank noted that Dunelm has had a somewhat rocky start to 2026, with disappointing second-quarter sales, and concerns over H1/H2 phasing sending the stock down 15% year-to-date. This has left the stock trading on a CY 26 price-to-earnings of about 12x, in line with the long-run sector average.
"This compares to Dunelm historically trading at a double digit percentage premium," JPM said. "While the white space opportunity is now more muted, the premium also reflected the market share opportunity more broadly and the high quality characteristics of the stock.
"Indeed, Dunelm has one of the highest free cash flow yields in our coverage at circa 11%."
JPM said expectations are now somewhat re-based.
"Current trading has improved. Incremental change from new CEO, Clo Moriarty is already landing. We therefore think that the risk has now shifted to the upside and we upgrade," it said.
The bank cut its price target to 1,225p from 1,240p, driven by changes to its forecasts.
JPM reduced its FY 26 pre-tax profit forecast by 3% to reflect the weaker-than-expected Q2 sales performance reported in January. "We now look for FY 26 PBT up 1% year-on-year to £213m, broadly in line with consensus for £214m," it said.
At 1107 GMT, the shares were up 0.4% at 963p.