Jefferies upgrades AO World to 'buy' after results

Jefferies upgraded AO World on Thursday to ‘buy’ from ‘hold’ after the online electricals retailer’s full-year results, and lifted the price target.

"AO's FY22 results are consistent with guidance and our expectations, but the embracing of the new profit-centric pivot looks set to drive earnings ahead of our previous estimates," it said.

Jefferies said revenue of £1.56bn and adjusted EBITDA of £8.5m were in line with previous guidance, and the divisional split between the UK and German was also as expected.

"We have long seen value in AO's model and proposition," it said. "We are now also encouraged by the strategic direction that is prioritising value creation over growth-at-all-costs.

"Leaving our methodology unchanged (10x EBITDA), our materially upgraded FY24 estimates drive a +44% uplift in our price target, from 45p to 65p.

"We upgrade to buy, seeing a good opportunity to own a business with a strong customer proposition, substantial market share, bolstered balance sheet, and a freshly pivoted strategy."

At 1005 BST, the shares were up 16% at 46.82p.