Analysts were out in force on Monday initiating coverage of online greeting card retailer Moonpig, which only just floated on the stock exchange, with the shares proving to be a ‘buy’ for all.
Jefferies, Citi and Numis started coverage of the stock at ‘buy’ with target prices of 510p, 550p and 500p, respectively. JPMorgan Cazenove initiated the shares at ‘overweight’ with a 495p price target.
Jefferies said Moonpig is “a very attractive business” with a dominant market share, a highly visible growth algorithm that should support +15% top-line progress into the medium term, a high EBITDA margin and strong cash generation. The bank said all of this merits a premium valuation.
Meanwhile, Citi noted that Moonpig is the number one market player “in the high-growth online greeting card and card-attached gifting market in the UK and the Netherlands”.
It said the brand was a “first-mover” in the personalised UK online card market, and significant market spend over the last 20 years has delivered high brand awareness and a market share more than 3x its nearest competitor.
“With 12m active customers, circa 160m cumulative transactions (Oct 20) and 78% of revenue from existing customers, Moonpig Group has created a valuable pool of customer data that helps power its recommendation engine,” it said.
Numis was equally flattering. “Growth has been accelerated as a result of the pandemic, an opportunity the business has seized upon,” it said.
“That has been supported by an improved proposition, benefitting from the current management team’s strategic focus and investment into technology. This has grown relevance in the predominantly offline card market and unlocked an opportunity to grow presence in the complementary gifting market.”
It said Moonpig is a “quality operator, uniquely positioned, with plenty of headroom for growth”.
Finally, JPMorgan referred to Moonpig as a Covid-19 winner with lasting benefits. “The group’s scale, data pool and loyal customer base create a first-mover advantage, which acts as a barrier to entry. This, together with structural tailwinds, provides a strong foundation for double-digit sales growth, which has been further boosted by Covid-19.”
JPM said a high category product gross margin – which it estimates at more than 77% – combined with an efficient card-first approach to gifting, and a significant degree of operating leverage, support the already leading EBITDA margin, and provide reinvestment opportunities. The bank expects revenues and EBITDA to broadly double year-on-year, in line with guidance.
