(Sharecast News) – Berenberg reiterated its ‘buy’ recommendation on Moonpig on Tuesday as it argued that while the shares have performed well year-to-date, it continues to see a re-rating opportunity.
“Moonpig is a market-leading business generating a 20%-plus return on invested capital; we expect it to return to double-digit earnings growth in outer years and think it has a clear path to de-leveraging rapidly,” Berenberg said.
The bank said Moonpig ultimately delivered on its revised revenue guidance of £320m for FY2023 and profitability was “robust”.
It noted that despite performing well so far this year, Moonpig shares still trade on just a 9% CY 2024 estimated free cash flow yield and 15x price-to-earnings, which it believes is too cheap for a business it expects to return to double-digit earnings growth in outer years.
“We believe fast de-leveraging over the coming years can drive a further re-rating,” Berenberg said.
Berenberg cut its price target on the shares to 250p from 270p.
