Berenberg downgrades Ascential to 'hold', slashes target price
Analysts at Berenberg downgraded business-to-business media firm Ascential from 'buy' to 'hold' on Wednesday and slashed their target price on the stock to 290.0p from 450.0p, stating it was now "cutting losses".
Berenberg said that while Ascential's group top-line momentum was "strong" during the first half, helped by the outperformance of its intelligence and events division, cracks have since emerged in the company's digital commerce segment's bull thesis.
The German bank highlighted that underlying DC pro-forma revenue growth had decelerated from 33% in 2021 to 19% in the first half, while adjusted underlying earnings margins also cratered from 18% to 2% as the company ramps-up investment ahead of an "expected acceleration" in sales in the second half, despite a decelerating market backdrop.
Berenberg now sees DC margins being lower in 2021 and thinks it may take longer to sustainably achieve the firm's mid-term target of 20%.
"Given that DC is the most important driver of market sentiment and is key to improving Ascential's stubbornly low quality of earnings and its underwhelming ROIC profile, this caution leads us to downgrade our rating to 'hold'," said Berenberg.
The analysts also reduced its adjusted EPS estimates for Ascential by 15-10% in 2022-23.
Reporting by Iain Gilbert at Sharecast.com