Shares of Lookers PLC (LON: LOOK) rallied 14% after the UK car retailer announced that the UK’s Financial Conduct Authority (FCA) had closed its investigation into its possible mis-selling products.
Lookers shares rallied to their current prices after the company revealed that its H2 2020 earnings were promising on January 29, 2021, after reporting a £50.5 million ($69.1 million) in H1 2020.
The company expects to return to profitability in 2021, driven by rising demand for cars as the UK starts to lift lockdown restrictions given its vaccination programme’s success compared to other countries.
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Lookers said that the FCA announcement would unlock £10.4 million ($14.43 million) that the company had set aside to cover any potential liabilities arising from the investigation.
Analysts at Zeus Capital recently updated their ratings on the car sales company, revealing that the stock was trading at a 34% discount to its Neta Asset Value (NAV) and a PE ratio of under 5X its FY2022 earnings.
The firm singled out Lookers as a bargain stock given its future earnings potential, yet the markets completely ignored the research as the company’s stock fell on the day the research note was released.
Technically, Lookers shares are trading above a major support level with the potential to rally up to the 58-60p level, but we cannot rule out a drop to the 33p support level before another rally. A break below the level would invalidate this trade idea.
Lookers share price.
Lookers shares rallied 13.99% to trade at 46.05p rising from Monday’s closing price of 40.4p