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Canaccord cuts Card Factory to 'hold', but growth potential intact

LONDON (ShareCast) - Card Factory (LSE: CARD.L - news) 's share price dropped on Thursday morning despite an in-line trading statement from the greeting cards and gifts retailer, with broker Canaccord Geunity weighing on the stock after downgrading its recommendation to 'hold'. Canaccord said that even though trading over Christmas was "solid", the shares have performed well since Card Factory's flotation last May and have risen by 15% since November alone.

As such, the stock has recently surpassed the broker's 270p target price - shares closed at 275.7p on Wednesday - prompting it to remove its 'buy' recommendation.

Nevertheless, analysts Mark Photiades and David Jeary remained optimistic about the company's future growth after an 8.1% rise in sales in the 11 months to 31 December and 1.8% growth on a like-for-like basis.

They said they didn't expect any major changes to consensus estimates for the financial year ending January 2015, with pre-tax profit still expected to be around £73m.

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"Card Factory floated in May'14 and offers a combination of several years of further space expansion of its eponymous fascia alongside multi-channel growth from the nascent Getting Personal business.

"This growth potential, coupled with a strong and established vertically integrated business model and a market-leading low-price 'value' orientated offer in a growing and still fragmented greetings card market, are key drivers of the investment case." By 10:51, the stock was down 4.1% at 264.4p.