Moneysupermarket risks not priced in, says Berenberg

Berenberg downgraded its stance on shares of Moneysupermarket to 'sell' from 'hold' on Monday as it argued that risks are not priced in and the stock's premium versus the FTSE 250 currently stands at nearly the highest level in five years, at abound 40%.

It noted the stock has risen more than 30% in the last three months, with the market pricing in an acceleration in organic growth and material market share gains, as well as a stabilisation of margins for FY19-20 after years of consistent decline.

However, Berenberg said it was less confident and that it saw little in the company's FY18 results to suggest that growth is improving.

"With weakening end markets, growing margin pressures and intensifying competition in its core verticals, we believe MONY will struggle to break out of its current low single-digit profit growth trajectory."

The bank forecasts 4-9% downside to consensus EBIT estimates in FY 2019-20, with the shares overvalued on 19.6x FY2019 price-to-earnings.

Berenberg, which nudged up its price target on the shares to 285p from 275p, said that even if it is proven wrong and Moneysupermarket does return to high single-digit organic earnings growth in FY 2019-21, it sees no material risk of a re-rating given the current valuation premium to its history and the market.

At 1135 BST, the shares were down 1.2% at 344.40p.