LONDON (ShareCast) - (Sharecast News) - Analysts at Shore Capital reiterated their 'sell' rating on household appliances and electricals retailer AO World on Thursday, with the broker stating the UK electrical market had become even more competitive since the group's IPO back in 2014.
Shore Cap said it continued to be impressed with both the infrastructure and service-led culture that AO World has built, but its analysts again highlighted that the company remained "sub-scale", despite the investment thesis at the time of its IPO in 2014, that it would "disrupt the UK white goods market".

"The UK electrical market remains as competitive as ever, particularly given current consumer sentiment and a more aggressive competitor in the form of Dixons Carphone, under new leadership, alongside Amazon, Argos and John Lewis," said Greg Lawless and his team.

Shore Cap noted that AO World's European operations also remained sub-scale and was only projected to move towards break-even during the 2021 financial year.

In terms of valuation, Shore Cap valued AO World using an EV/sales, EV/EBITDA and DCF combination - which generated a fair value range of 60p-79p per share and a mid-point of 70p.

"As this suggests 31% downside versus the current share price, we reiterate our 'sell' rating," Shore Cap concluded.

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