Canaccord Genuity stays at 'buy' on System1 following CMD event

Analysts at Canaccord Genuity reiterated their 'buy' rating and 450.0p target price on software firm System1 on Thursday following the group's capital markets day event earlier in the week.

Canaccord Genuity said Wednesday's capital markets day, in its view, reaffirmed "the impressive progress" that System1 has made since the launch of its strategic review.

"CEO James Gregory described how the refreshed go-to-market strategy has helped drive strong customer momentum for its data and data-led consultancy platform solutions, which enable its customers to predict and improve marketing effectiveness and optimise ROI," said Canaccord, which added that here, new and existing customer revenue was up 237% and 32% year-to-date, respectively.

Chief financial officer Chris Willford reiterated the group's full-year guidance, implying fourth-quarter sales of £7.8m, up 18% year-on-year, which the Canadian bank sees achievable, given run-rate performance, whilst adjusted underlying earnings consensus of £4.1m implied margin improvement of roughly 700 basis points, a trend which was expected to continue as the platform model drives operational gearing from the largely fixed cost base.

"System1's successful execution of strategy is evidenced, in our opinion, in the strengthening financial profile, which in turn has triggered four consecutive upgrades, most recently with the Q3 trading update. Despite this, the shares continue to trade at a >30% discount to peers on a CY24E EV/Sales of 1.2x, which we view to be unwarranted given its highly scalable growth trajectory. We reiterate our 450p target price, equivalent to a CY24E EV/Sales of 1.6x, which is in line with the peer group average," said Canaccord Genuity.

Reporting by Iain Gilbert at Sharecast.com