Liberum cuts THG price target but reiterates ‘buy’

by | Jan 18, 2022

Liberum cuts its price target on THG on Tuesday to 700p from 750p after the online retailer warned that its profit margins for the year will miss analysts’ forecasts and revenue growth will slow.
In an update for the quarter to the end of December 2021, the company said full-year adjusted EBITDA margin was expected to be between 7.4% and 7.7%, below market expectations of around 7.9%, due to adverse foreign currency movements.

It also said that revenue growth would slow to between 22% and 25%. Liberum said this compares with consensus expectations of around 30%.

The broker, which reiterated its ‘buy’ rating on the shares, said it was cutting estimates based on the updated guidance but continues to believe that the fundamentals in place at the time of the IPO have not changed, “so the extent of the share price decline we saw last year is excessive”.

For FY22, Liberum brought down its sales growth forecasts to 23% from 27%, in line with company guidance. It cut its adjusted EBITDA forecast by 17% and adjusted EBITDA margin forecast to 8% to account for gross margin pressure in the Nutrition business due to rising whey powder costs and continued impact from FX.

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