Shore Capital upgrades AO World to 'buy'
By Michele Maatouk
Date: Wednesday 10 Apr 2024
(Sharecast News) - Shore Capital upgraded AO World on Wednesday to 'buy' from 'hold'.
It said the online electricals company is "emerging as a capital-light cash compounder within an industry we believe will accommodate for margin recovery over the short term and which is at a volume trough versus the past ten years".
Shore said that over the medium term, building blocks are clearing for AO to generate, on its estimates, high single digit percentage sales growth and a circa 20% earnings per share compound annual growth rate, before strong free cash flow enabled buyback optionality.
This could offer a further circa 15% uplift to the broker's FY27 EPS forecasts, it said.
"On this basis, we see a runway for AO to achieve 8.6p of FY27F EPS, which on a price-to-earnings in-line with today, would imply an FY27F share price of double 105p."
At 1000 BST, the shares were up 3.2% at 108.80p.
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