JPMorgan puts Trustpilot on ‘positive catalyst watch’, shares rally

JPMorgan Cazenove placed Trustpilot shares on ‘positive catalyst watch’ on Monday ahead of the first-half trading update on 11 July, saying it expects another period of adjusted EBITDA ahead of expectations.

The bank said it sees upside risk to full-year expectations.

"We expect the greatest focus to be on adjusted EBITDA delivery, with Trustpilot now past its breakeven point and beginning to generate organic free cash flow," JPM said.

It forecasts around $10.5m of adjusted EBITDA through the period, which stands about 9% ahead of company consensus.

"Our delta versus expectations is driven by a more positive view on how much operating leverage Trustpilot can drive," it said.

"Specifically, we expect sequential progress in cost leverage versus H123 across sales & marketing (S&M) expenses, helped in part by accelerating US growth (JPM estimated adjusted S&M expenses circa 30.5% of sales in H124 versus circa 31.2% in H223).

"We build in less sequential progress on cost leverage across Research & Development (R&D) and General & Administrative (G&A) expenses, leaving a buffer for upside risk to our margin estimates."

Overall, the bank said that while its H124 earnings estimates are ahead of expectations, its forecasts imply a relatively conservative sequential ramp in profitability.

JPM rates Trustpilot at ‘overweight’ with a 250p price target.

At 1050 BST, the shares were up 3.7% at 223p.