Deutsche Bank has cut its rating on AO World PLC (LSE:AO.) from 'buy' to 'hold', lowering its price target to 105p from 135p.
The downgrade reflects a view that the shares are now fairly valued as earnings growth returns to more normal levels. On Tuesday, the shares were up 0.5p at 91p.
In a note, Deutsch said: “We extend our forecast horizon to 2028 and revisit valuation in the context of more normalised earnings growth, concluding the shares are fairly valued ahead of better visibility on the art of the possible with AO membership.”
It added that while AO demonstrated it can deliver double-digit business-to-consumer revenue growth in 2025, the challenge now is to expand wallet share in a competitive market.
Deutsche noted that AO’s strength in efficient two-man delivery and high customer service is less of a differentiator in smaller appliances, where it faces Amazon’s cost-effective Prime and the convenience of omnichannel rivals.
AO does not plan to pursue aggressive price competition, meaning convincing customers of the value in its membership scheme will be crucial.