Canaccord cuts THG to 'hold', sees potentially long road to recovery

Canaccord Genuity downgraded shares of THG from 'speculative buy' to 'hold' after the e-commerce company's decision to reject a bid from private equity giant Apollo.

"The failure of the Apollo discussions will no doubt raise question marks over why," they said.

Furthermore, the trading environment in the sector remained tough and visibility on demand "limited".

The analysts also announced a change in their valuation methodology to sum-of-the-parts, on the back of which the target price reduced from 98.0p to 69.0p.

"We downgrade our recommendation to HOLD (from Speculative Buy), with THG currently trading on a FY23E EV/EBITDA of c.11x, at the top end of the UK eCommerce sector valuation range.

"In our view, it could be a long road to recovery, with an uncertain outlook and two of the three core divisions currently misfiring."