RBC Capital cuts Moneysupermarket on near-term challenges
RBC Capital Markets cut its stance on Moneysupermarket.com to 'sector perform' from 'outperform', chopping the target price to 350p from 425p, saying that while the company's diversified model makes it a winner over the longer-term, the near-term could be more challenging.
The bank said that with the stock trading at a premium to its closest peer - it trades on 18.8x 2018 price-to-earnings versus Gocompare on 14.7x - there is little room for multiple expansion in the coming year and it would rather wait for a better entry point into what it still sees as an attractive long-term story.
In addition, it argued that the near term could be more challenging than it previously thought for the company's Money and Home businesses, with interest rates remaining at low levels and few opportunities to run attractive collective switches in home services as energy prices rise.
The bank also pointed out that motor insurance prices are at their peak and look set to drop in 2018, having risen for nine consecutive quarters from the second quarter of 2015 to the second quarter of 2017.
"We believe that any pressure on motor insurance prices will mean that momentum in insurance revenues is unlikely to bridge the revenue gap in the way that it did during 2017," RBC said, cutting its 2016-2021 estimates for revenue compound annual growth rate to 7% from 10%.
"We believe that revenue growth will be more difficult to achieve. The largest reductions come in home services and money products."
At 1535 GMT, the shares were up 0.1% to 320.20p.