Stifel, the investment bank, has upgraded Rentokil Initial to 'buy' from 'hold', arguing that the pest control and hygiene group's valuation has become too cheap to ignore.
The broker trimmed its target price fractionally to 390p from 395p, though that still implies roughly 30% upside from the 299p at which the FTSE 100 company's shares closed on 2 October.
Rentokil's share price dipped below £3 last week for the first time since 2018, leaving its valuation at the lowest level in more than a decade.
The stock has endured a torrid run, falling 20.6% on 30 July when interim results laid bare how much work remained in North America, four years after the acquisition of US rival Terminix.
Shares have since drifted a further 15%, against a 3.5% decline in the FTSE All Share.
Analyst Sam Dindol pointed to subdued organic growth in North American pest control, which he expects to run at 0% to 2% in the third quarter.
Part of the weakness has an unusual cause, with US peer Rollins blaming the shift towards AI chatbots, or large language models, for a sharp drop in customer enquiries.
Rollins told a conference last month that it had seen double-digit declines in sales leads, attributing 50% to 60% of the fall to users turning to tools such as ChatGPT rather than Google search.
Dindol argued that the volume of pest control leads flowing through such tools remained small, and expected larger players to adapt over time.
He also flagged scope for corporate action should the turnaround stall, including a possible move to a primary US listing or a private equity takeover, a prospect given weight by activist investor Trian's presence on the board since October 2024.
Rentokil, led by new chief executive Mike Duffy, reports third-quarter trading on 22 October.
In early trading, the shares were flat at 299.1p.
