RBC upgrades Moneysupermarket to 'sector perform'
Analysts at RBC Capital Markets upgraded Moneysupermarket from 'underperform' to 'sector perform' on Tuesday, stating that the group's risk/reward scenario was now "more balanced".
RBC, which also upped its price target on the group from 300.0p to 320.0p, said it was lifting its estimates for Moneysupermarket primarily on an improved revenue outlook - including the launch of its new auto-switching product.
Following Moneysupermarket's 2019 full-year results, RBC also raised its 2020-22 revenue estimates by 4-6%, primarily reflecting an improving backdrop for the segment. However, the analysts noted this would be somewhat offset by a planned increase in marketing spend, which overall led it to a 3-5% upgrade to its adjusted underlying earnings forecasts.
While the Canadian broker said it continued to see downside risk to earnings, it now believes the firm's recent share price weakness left it in a more balanced position.
"Our FY20-21 EBITDA forecasts remain 3-4% below consensus, and implies c.1% growth in FY20, before recovering to +5% in FY21/22e. We expect MONY's adjusted EBITDA margin to decline by almost 200bps in FY20e driven by gross margin pressure (shift to mobile, for which conversion is lower, and shift to paid search) and a step-up in brand marketing spend," said RBC.