Berenberg lowers target price on Moneysupermarket

Analysts at Berenberg lowered their target price on price comparison website operator Moneysupermarket.com from 275.0p to 240.0p on Wednesday, citing risks from Amazon's newly announced home insurance comparison site.

Berenberg stated that after once again beating expectations with its Q3 results, Moneysupermarket increased full-year 2022 underlying earnings guidance by 15% over the past three months.

However, the analysts pointed out that despite this, the stock remains near its lows for the year and trades at a near-decade low of 13.0x price-to-earnings, a 9.0% free cash flow yield, and a 6.8% dividend yield for 2022.

Berenberg said much of this stems from concern linked to Amazon, which launched with a narrow proposition of only three mid-sized providers, compared to over 60 providers offered by Moneysupremarket, making it "an uncompetitive proposition" at present.

While the German bank noted that price comparison has historically been a tough market into which to break, Amazon does reach the majority of UK households, enjoys more regular purchase engagement, and has "equally rich" first-party consumer data as comparison websites, giving it "a strong base" on which to build a comparison tool.

"All in, we do not believe Amazon will have a material short-term impact on the outlook for insurance switching, while the impact over the medium term depends on how quickly and earnestly Amazon invests in this venture: the most likely outcome is that it adds to an already highly competitive market but is not a category killer given the nature of price comparison in our view," said Berenberg,

"We believe the threat posed by Amazon is overstated and continue to believe MONY will prove resilient in the tough macro environment."

Reporting by Iain Gilbert at Sharecast.com