Broker tips: Trustpilot, TI Fluid Systems, Aptitude Software

By Iain Gilbert

Date: Tuesday 21 Mar 2023

Broker tips: Trustpilot, TI Fluid Systems, Aptitude Software

(Sharecast News) - Analysts at Berenberg lowered their target price on review website operator Trustpilot from 180.0p to 160.0p on Tuesday but said it still expects to see positive underlying earnings and cash flow in 2023.
Berenberg said Trutpilot's 2022 bookings and revenue figures were in line with expectations, while adjusted underlying earnings came in approximately 50% ahead of its expectations as the company delivered positive EBITDA and free cash flow in the second half.

The German bank also highlighted that the group was expected to be EBITDA-positive in 2023, a year earlier than previously anticipated, on the back of higher operating leverage, and more prudent sales and marketing spend given "difficult macro conditions".

"We think reducing sales and marketing dollars in current market conditions is the right strategy as businesses will naturally be more reluctant to pay for any new subscriptions. This means lower-than-expected top-line growth in FY23 but higher profitability," said Berenberg, which stood by its 'buy' rating on the stock.

"As mentioned in our previous reports, we continue to think that Trustpilot has significant growth opportunities in the future and the risk-reward balance at the current valuation of c1.8x EV/sales is compelling."

Jefferies upgraded TI Fluid Systems to 'hold' from 'underperform' on Tuesday, mainly on valuation grounds, with the share price down around 20% since January.

"There is still plenty of uncertainty around FY23F, and this year will be critical for TIFS in terms of improving execution and regaining market trust, but we feel expectations have been set sensibly, and see downside risk as priced in at these levels, with the stock trading at a circa 20% discount to peers, which we expect to revert to the 15% LTA," the bank said.

Jefferies, which has a 100.0p target price on the stock, said the company's FY22 results contained no major surprises, and it felt the level of disclosure was much improved.

"When we look to FY23F, TIFS is guiding to 0-1% pricing, and flat global light vehicle production (GLVP) volumes which is slightly more cautious than average peer commentary," it noted.

Jefferies said it retains "a degree" of scepticism around TIFS's upbeat expectations on cost recovery, given more bearish commentary from peers and labour/energy pressures, and has reduced its FY23 EBITA margin forecast slightly to 5.9% from 6.1%, versus new guidance of more than 6%.

Over at Canaccord Genuity, analysts lowered their target price on finance applications developer Aptitude Software Group from 670.0p to 615.0p on Tuesday but kept its 'buy' rating in place, stating it appeared to be time to "buy the dip".

Canaccord Genuity said Aptitude's January trading update indicated that full-year trading was in line with consensus and added that Tuesday's release confirmed it had made "a solid finish" to the year.

Despite the "sluggish macro", the analysts said Aptitude's outlook suggested confidence in accelerating annual recurring revenue growth by roughly 10% and delivering margin expansion in 2023.

"This is backed by several new logo wins across the product portfolio in the first months of the year as well as a good pipeline. We also note that the £51.6m end-2022 ARR covers 90% of our 2023 software revenue forecast," said Canaccord Genuity.

The Canadian bank also stated operating margins should benefit from a tailing off in research and development for the firm's new Fynapse platform.


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