With the stock market reaching new record highs, finding cheap, quality UK shares is becoming tougher. But there are always opportunities for investors to explore. And one stock that some experts have flagged as a potential bargain buy is Card Factory (LSE:CARD).
Last December, the greetings card and gift retailer announced a pretty devastating profit warning, despite only a few months prior saying that the business remained on track. It was a nasty surprise that saw Card Factory shares crash almost 30% in a single day.
Yet since then, optimism from experts seems to be creeping back in with hopes for an incoming recovery. Does that secretly make this business a top UK stock to consider buying right now?
Card Factory shares are dirt cheap
Even after management cut its earnings guidance for its 2026 fiscal year (ending in January), the utter collapse of its share price means that the business is currently being valued at just 5.5 times forward earnings.
That’s among the cheapest valuations on the entire London Stock Exchange. And it signals exceptionally low expectations coming from investors. But it also means that if management can deliver on even a modest profit improvement, Card Factory shares could be well-positioned for a rapid initial share price recovery.
That seems to be what many institutional experts are betting on.
With most having the opinion that the market has oversold this stock, the latest forecasts from Canaccord Genuity, UBS, and Berenberg have placed the consensus share price target for Card Factory shares at 126p. And compared to where the shares are trading today, that represents a roughly 77% potential recovery gain!
What to watch
As a largely consumer discretionary business, Card Factory’s performance is strongly tied to consumer spending. A big challenge seen recently has been a decline in footfall to its high-street stores, particularly during peak trading periods like Christmas.
But if the GfK Consumer Sentiment index continues to show steady signs of improvement, the business appears well-positioned to capitalise on this long-term tailwind.
In the meantime, management continues to pursue its online diversification strategy with its recent acquisitions, including Funky Pigeon. Successful integration of these bolt-on businesses could help expand the group’s e-commerce presence and create new cross-selling opportunities.
Of course, none of this is guaranteed. After all, low barriers to entry have seen some pretty fierce competition emerge over the years. In particular, supermarkets have started selling comparable greetings cards at lower prices as loss-leaders to drive higher footfall to their stores.
The bottom line
There’s no denying that Card Factory is operating in a space facing continuous pressure from rivals and weakened macroeconomics. But to management’s credit, the business hasn’t been idle, implementing digital transformation to diversify and drive more efficiency, while simultaneously pursuing cost-saving initiatives.
A successful turnaround is far from guaranteed. But with the market pricing Card Factory shares as if it’s already doomed to fail, the risk-to-reward ratio looks potentially quite favourable. That’s why I think it may be worth digging a little deeper. But there are also other discounted UK shares on my radar that show even more promise.
