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UBS ups rating on Moneysupermarket

Wed 22 May 2019 13:14 | A A A

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(Sharecast News) - UBS has upgraded its rating on Moneysupermarket Group and boosted earnings forecasts, arguing that the price comparison site is gearing up to enter a "virtuous circle".

The Swiss broker said a three-year period of investment in back-end technology had left the front-end business "undervalued and vulnerable to competition".

But, the bank argued, "this has changed". It said the business was entering a "virtuous circle", noting: "Its engineering hub is now operating in full swing, likely boosting conversion rates and revenue growth, and Moneysupermarket has a unique opportunity to drive recurring transactions on its 13m user base, at high incremental margins.

"As conversation rates improve and user engagement initiatives come through, we now think earnings growth can accelerate to double-digit by 2020, with high single-digit revenue growth and operational leverage."

UBS has upped its rating to 'buy' from 'neutral', and increased its price target from 305p to 415p. It increased revenue estimates by 5% over 2019 to 2021, "as we have seen multiple proof points showing that product optimisation is translating into conversion gains."

Looking further ahead, UBS added that personalisation "is the big prize, which could drive +15% upside to our 2022 base case EBITDA".

Shares in Moneysupermarket were ahead a little over 1% by 1345 BST, at 370.8p.

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