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Majestic's upgraded to a 'Buy' listing following Naked Wines results

Published:  26 April, 2016

A 'Buy' rating has been set for shares at Majestic Wines, highlighting the potential of Naked Wines acquired by the company last year.

According to an update released by analysts at Peel Hunt, the broker has now set a 'Buy' rating on shares of Majestic Wine PLC with a price target of 540.

This is a potential increase of 22.66% from Majestic Wine PLC's current price of 440.25.

This could be seen as part of an upward surge for the company, which reported sales as being up 12.2% back in January after a lacklustre start to the year.

The results follow strategizing by new chief executive Rowan Gormley.

Gormley joined from Naked Wines, which was acquired for £70 million last April.

Majestic Wine PLC is a United Kingdom-based holding company, which retails wines, beers and spirits.

A spokesperson for Peel Hunt said: "Majestic Wine should be seen as an online growth play alongside a store-based cash cow. Most of the potential here lies in the fast-growing Naked Wines, which has disrupted the UK market and is doing the same in the larger US."

The brokerage said the acquisition of Naked Wines last year has transformed the outlook for the new enlarged group, following a loss of momentum at the Majestic Wine business prior to the acquistion, when it struggled to compete with the supermarkets.

"Ultimately however, putting Majestic back on a growth trajectory will be eclipsed by the global potential of Naked Wines. Our sense is the new strategy and growth prospects for the business have yet to be fully understood by the market, despite the recent improvement in share price," the spokesperson added.

The company's segments include Majestic Wine Warehouses, Naked Wines, Lay & Wheeler and Majestic Wine Calais.

Lay & Wheeler is a fine wine merchant engaged in en primeur sales, cellarage and broking of customer reserves.

Majestic Wine Calais is a retailer-based in Calais selling to the United Kingdom consumers on lower rate of alcohol duty in France.