ZPG rallies as Morgan Stanley highlights building momentum

ZPG, the owner of Zoopla, USwitch and PrimeLocation, was boosted on Tuesday as Morgan Stanley upped its stance on the stock to 'overweight' from 'equalweight' and lifted the price target to 400p from 360p.

The bank said that its 'AlphaWise' survey points to structural trends underpinning energy switching behaviour, and highlights USwitch's market leadership. It now expects Energy to maintain double-digit growth over the next few years, outweighing potential short-term headwinds from price caps.

This drives a 7% upgrade to its earnings per share estimates over the next four years.

"ZPG's strong position in the energy and finance verticals should make for further cross sell opportunities. Our bull case incorporates 18% growth in comparison services and faster operational leverage as ZPG moves towards management's 40% margin target," MS said.

Meanwhile, the bank's recent eHome tracker showed that Zoopla's listings share is at its highest in three years.

"Zoopla has built up an attractive position across property marketing, software and data services. While the property market may remain subdued, Zoopla should benefit from the tailwind of agents returning to the porta, sustaining higher growth than the leading property classifieds Rightmove over the next few years."

MS also pointed out that Money.co.uk is one of the leading money price comparison sites with strong organic growth and said there could be a big opportunity for cross selling of products.

In addition, it said the stock's valuation is attractive, with ZPG's valuation gap versus peers at its highest in two years.

At 1050 GMT, the shares were up 3.6% to 347.60p.