(Sharecast News) – Shore Capital downgraded its stance on online electricals retailer AO World on Wednesday to ‘sell’ from ‘hold’.
The broker said recent strength in the share price does not reflect a deteriorating trading backdrop evidenced by upstream read-across after what it believes was already a weak first quarter.
“In a scenario where H1 is down circa 10%, H2 would require a robust return to growth against raised energy efficient appliance demand and the World Cup baked into Q3 comps,” it said.
ShoreCap kept its fair value on the shares at 80p and said it’s not downgrading its estimates today but views a 25x price-to-earnings and free cash flow yield of around 4% for FY24 as “demanding”. The broker added that it sees better value elsewhere.