Jefferies double upgrades Future to ‘buy’, shares surge

The bank said "signs of inflection and Growth Acceleration Strategy (GAS) progress provide us with confidence to double upgrade".

Jefferies said it was confident of a strong return to growth in revenue, supported by macro inflection, positive audience trends, content quality improvements, and further upside from higher yielding US direct ad sales.

The bank said peaking macro pressure skews risk to the upside. It said macro improvement should result in a strong return to revenue growth, especially for digital ads & affiliate product.

"We expect Future to outperform peers, due to its highly cyclical Tech & Gaming portfolio (66% of audience), monetised largely via digital Ads (30% of revenue) and affiliate product (10%)," it said.

It also noted that importantly, the top 12 websites (around 70% of traffic) show positive momentum.

"Our analysis, suggests that the core online audience will continue to recover and support a continued recovery in the overall audience which will enable a return to growth in digital ad and affiliate product revenue with the macro," it said.

Jefferies also said it sees further upside from a continued mix shift towards higher yielding US direct ad sales.

"Future has demonstrated some traction here, with a +2pp increase in share of direct and branded content as part of Digital Ads in 1H24," it noted.

Jefferies said direct ads offer a 4x higher yield versus open auction.

"Whilst difficult to quantify, we see room for growth and margin expansion, aided by improvements in content quality and a larger US sales force," it said. "We expect the benefits of US investments to become evident as the macro inflects and the US ad market recovers."

At 0925 BST, the shares were up 7.8% at 1,080.84p.