Mindful Money’s weekly shares watch: Imagination Technologies, Dixons Carphone, Serco & Carnival

15th December 2014

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Following a number of profit warnings investors will be hoping for some Christmas cheer from Imagination Technologies when it updates the market with its second quarter results on Tuesday.

The FTSE Small Cap listed multi-media tech firm has endured a 23% share price fall over the past six months but the market may be sensing a long-term opportunity.

According to Digital Look, the stock is firmly in ‘buy’ territory, with JP Morgan Casenove having just reiterated its own ‘overweight’ recommendation.

For his part, Sheridan Admans, investment research manager at The Share Centre is calling the stock a ‘hold’. He says: “As consumers become more willing to buy lower end smartphones, margins for the business have been reduced. This has resulted in the group coming under pressure, as competition in the sector intensifies.

“However, the recent launch of Apple’s latest iPhone models, which are selling well, could provide a boost. Investors will be looking for the number of new licenses signed and how the Pure division is doing.”

With Dixons and Carphone Warehouse having completed a merger back in early August, the combined group’s first quarter trading statement in September highlighted “a good start.”

Wednesday sees the combined Dixons Carphone , up 12% over three months, announce its interim results. Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers highlights that with its management having previously underlined the newly formed company as a likely beneficiary of the expected growth in the so-called ‘internet of things’, analyst consensus opinion currently signifies a ‘strong buy’.

Bowman says: “The launch of Apple’s iPhone 6 is expected to have underwritten sales during the second quarter, while management outlook comments and any update on expected merger cost savings will be closely watched for.”

Support services and FSTE 250 member Serco Group publishes its own trading update on Friday.  No less than four profit warnings over the last year have seen the firm’s shares plummet by 63% – over three months they are off by 47%, as such shareholders will be hoping for some rays of light.

But Admans is not convinced the firm is worth hanging onto, and has the stock on his ‘sell’ list. He says: “The new CEO needs to restore a measure of confidence in the group, which will not be easy. Investors will therefore be looking for more news on his strategy review and long-term rescue plan. Other areas to concentrate on will be any comments on its US operations and the company’s overall financial situation.”

Friday will also see travel and leisure giant Carnival deliver its fourth quarter results. Over the past 12 months shares in the FTSE 100 constituent are up a robust 27% and according to Bowman, given the fact that the economic strength in the Caribbean, a key market for the group, is closely linked to that of the US its operations in the region are likely to report ongoing progress.

He says: “Higher onboard passenger spending and the group’s Asian operations, particularly China, may further assist performance. In all, with Carnival a probable beneficiary of the recent fall in the oil price, but with the share price already looking to reflect this – up by nearly 20% over the last three months – analyst opinion ahead of the announcement points towards a ‘strong hold’.”

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