Numis sees "huge" growth potential at AO World after Q3 acceleration

‘Buy’ shares of AO World, recommended broker Numis Securities, after sales growth at the online electrical appliances retailer accelerated in the third quarter.

AO World said total sales increased by 26% in the three months to 31 December 2014, with growth picking up from 20% in the first half.

Numis Securities said the outcome was a “touch ahead” of the estimated 25% growth for the whole of the second half.

Analysts Andrew Wade and Matthew Taylor said they were “encouraged” by the strong performance in audio-visual (AV) categories, as well as the strong demand noted by the company on Black Friday.

Meanwhile, operations in Germany, where it launched in October, are running ahead of plan. The analysts said they see scope for a “significant marketing push” in Germany, which would increase losses in the short term but bring forward the expansion timeline.

“With trading largely as anticipated, we leave our forecasts unchanged but are encouraged by the incremental positives in both the AV category and the German operations,” Wade and Taylor said.

“We continue to believe that AO's superior customer proposition underpins a huge growth opportunity, both in the UK and Europe and retain our ‘buy’ recommendation.”

The broker kept a 350p target price for AO World’s shares, which were up 7.4% at 265.4p by 10:12.