Broker snap: Peel Hunt slashes Homeserve target, as investigation looms

3rd Nov 2011 11:34

Three days after downgrading Homeserve's rating from hold to sell, Pell Hunt has slashed its target price for the emergency repair services firm from 450p to 280p, saying that an "FSA investigation looms".Homeserve saw its shares plummet by over a quarter on Monday after audit firm Deloitte found "processes that did not meet the company's required standards." The firm responded by saying it has started "an immediate re-training programme for its telephone sales staff and is developing new scripts." "We believe the FSA won't be able to be seen to sit on the sidelines and allow Homeserve to deal internally with an issue that could possible relate to miss-selling to consumers," said analyst Henry Carver.The broker worries that this "episode" may have an impact of Homeserve's international growth, which it sees as an integral part of its long-term investment case.Also, Carver added, "With Homeserve now suspending outgoing sales calls during the critical autumn/winter period there is an undeniable opportunity for competitors to step up their offering and take market share."UBS also cut its target price on the stock today, from 580p to 400p, but kept its buy rating.By 11:33, shares were down 1.77% at 327,6p.