JPMorgan puts Trustpilot on 'positive catalyst watch' ahead of results

(Sharecast News) - Trustpilot rallied on Wednesday as JPMorgan Cazenove placed the shares on "positive catalyst watch" into results and said that underperformance year-to-date presents a buying opportunity.

JPM noted that the shares are down 12% YTD, versus its wider European Software coverage up 7%, the Stoxx Europe 600 up 5% and the FTSE 250 down 4%.

"While the shares have enjoyed a strong run over the last two years (up circa 178% since March 2023), we struggle to justify this significant underperformance YTD (with shares down 23% in the last four weeks), given the above-average earnings growth and attractive free cash flow inflection," it said.

It also pointed out that Trustpilot has recently printed well above expectations growth in the US - a key growth market, which has been a strategic area of focus for management - which it expects to be a focus for the upcoming FY24 results, scheduled for 18 March.

"Through mid-2024, Trustpilot's shares temporarily underperformed, which we argued at the time was a buying opportunity, when shares were at 225p; amidst current market volatility, we see the current juncture of underperformance as a similarly attractive entry-point for a business that is growing at mid-teens while expanding margins at pace and returning capital to shareholders," JPM said.

"We leave our above-consensus estimates unchanged and with a lowered bar now heading into the results, we place the shares onto positive catalyst watch into the FY24 results, seeing outperformance being driven by earnings and free cash upside, positive US growth momentum, potential for further capital returns and share price mean reversion versus peers."

JPMorgan rates the shares at 'overweight' with a 350p price target.

At 0940 GMT, the shares were up 1.9% at 275p.