Broker tips: Trustpilot, Clarkson

Analysts at JP Morgan raised their target price on review website operator Trustpilot from 190.0p to 250.0p on Tuesday, stating earnings momentum looked set to continue as the group transitions into a fast-growing free cashflow generator.

JP Morgan stated that since it upgraded Trustpilot to 'overweight' from 'neutral' in February 2023, guidance has been upgraded four times, driving earnings and FCF estimates upward.

"Shares are up ~125% in the last six months and investors we interact with are increasingly focussed on where incremental upside comes from," noted JPM, which reexamined its investment thesis on Trustpilot and took "a refreshed view" on what drives performance from here.

"Looking forward, we see earnings supported by: 1) Further operational leverage to come, driving continued momentum in earnings upgrades; 2) Manageable top-line estimates through 2024; 3) Conservative FCF consensus outlook through 2024, supported by Trustpilot’s negative working capital profile; 4) Trustpilot well positioned as a GenAI winner," said JPM.

It also stated it sees valuation support from Trustpilot's ongoing share buyback programme, as well as a continued beat and raise cadence under new management, with a focus on profitable growth, and a supportive bond yield environment.

"We increase our underlying EBITDA estimates ~13-16% and raise our PT to 250p, continuing to see Trustpilot as a unique asset well positioned for multi-year profitable growth (JPMe ~54% FCF CAGR 2023-2026)," concluded JPM.

Analysts at Canaccord Genuity raised their target price on shipping services firm Clarkson from 4,325.0p to 4,500.0p on Tuesday after the group delivered a 23% incremental pre-tax profit margin in FY23, lower tax, and a dividend per share of 102.0p with still sizeable net free cash balances at end of the trading year.

Canaccord Genuity said the opportunity it saw was that Clarkson shares deliver just a 13.1x year-ahead price-to-earnings ratio versus the previous lowest quartile 15.6x and pre-Covid median PER at roughly 19.7x.

"As Clarkson enters FY24E, DPS progression, growing net free cash, and scope to repeat 2023's profit improvements are all potential catalysts ahead," said Canaccord.

"Prospects tend to strengthen as the calendar year matures – helped as profit-compounding factors intensify from the company's investment in colleague teams (e.g., more broking experts), improved technology (like Sea/), and upside from bolt-on M&A."

The Canadian bank, which reiterated its 'buy' rating on the stock, thinks that its sizeable free cash differentiates and enhances the value of Clarkson by adding confidence to counterparties and employees, as well as strong foundations to continue dividend progression.

Canaccord added that improving return on equity and cash added to potential upward pressure.