Broker snap: Immediate recovery at Homeserve unlikely, says Charles Stanley

18th Nov 2011 11:34

Charles Stanley has slashed its target price for Homeserve from 505p to 290p, saying that 2013 earnings and key performance indicators (KPIs) are "under threat".The stock is now down 44% since it announced that telesales and marketing activities were suspended over mis-selling issues on 31 October. The broker notes that while the fall may have been overdone, an immediate recovery is unlikely, given CPP's struggles to recuperate after concerns over mis-selling practices.Charles Stanley analyst Andy Smith said, "We see no reason why Homeserve's share price should behave any differently, especially as its UK operation accounts for 82% of operating profits. It has given no timetable as to when its sales staff (who account for 50% of new policy sales) will be fully functional again - indeed it has already missed one deadline to get its in-bound sales back up and running."Before the October revelation, the broker had kept a hold rating on the stock, due to its high valuation. While this no longer is a concern, given recent developments, "it is too soon in our view to rate Homeserve a buy. Neither is it a sell given the precipitous fall."Shares were down 1.8% at 261.2p by 11:33. The price is now 43.59% cheaper than it was a month ago.BC