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Berenberg starts GoCompare at 'buy', Moneysupermarket at 'hold'

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Berenberg starts GoCompare at 'buy', Moneysupermarket at 'hold'

Wed, 13 September 2017
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Berenberg starts GoCompare at 'buy', Moneysupermarket at 'hold'

(ShareCast News) - Berenberg initiated coverage of GoCompare and Moneysupermarket on Wednesday, noting that UK price comparison websites have many of the dynamics that investors like.
"They are high margin, are cash generative and operate in broadly stable end-markets. They have also delivered steady returns for their investor base over the last decade," the bank said, adding that it reckons power is shifting away from the historical incumbent, Moneysupermarket, towards newer entrants such as ZPG and GoCompare.

As a result, it initiated coverage of Moneysupermarket with a 'hold' rating and 320 price target, and GoCompare with a 'buy' rating and 130p price target.

"With a newly formed management team from leading online businesses, such as Skype, Spotify, KAYAK, Paddy Power and student.com, we believe GoCompare now has the leadership to implement initiatives to improve the platform's customer journey, marketing efficiency and user conversion, ultimately leading to better growth and margins."

In addition, Berenberg noted that the stock trades on a discount of around 30% versus Moneysupermarket, despite twice the consensus earnings per share forecasts.

On Money, it said that even though guidance for the full year has already been lowered by 2% after a weak first half, there could be a scenario in which estimates come down even further.

"Specifically, we feel the acceleration in each vertical forecast by consensus may be ambitious. While our base case numbers imply 2% downside to guidance, our bear case indicates there could be as much as 10%, principally if the challenges in home services continue and the group's remaining businesses deliver a more normalised H2."

It added that the company's third-quarter trading update in October will be key in determining whether 2017 guidance will be met.

At 0930 BST, GoCompare was up 0.5% to 99.25p and Moneysupermarket was off 0.4% to 317.30p.