The market is ignoring the defensive qualities that Halfords (HFD) offers, according to Peel Hunt.
Analyst Jonathan Pritchard retained his ‘buy’ recommendation and target price of 350p on the stock, which rallied 12% to close at 161p on Wednesday.
The bicycle and car accessories retailer has acquired Lodge Tyre Company, which has 50 garages across the UK, for £37m.
‘We consider this a good move, both strategically and geographically,’ said Pritchard.
‘Business-to-business now contributes 22% of group sales, and almost half in total comes from services.
‘Halfords has growth opportunities in pure retail, but the market has so far ignored the fact that it operates in the more defensive services market as well. Deals like this should ensure that perception changes, and the multiple with it.’