Moonpig Group PLC (LSE:MOON) has been sent a glowing missive from the City after UBS said the online greetings card retailer's shares still look cheap despite a strong run of results.
The Swiss bank lifted its target price to 300p from 290p and maintained a 'buy' recommendation after full-year results beat expectations, helped by stronger margins, cash generation and share buybacks. The shares closed at 236p on Thursday.
UBS argued that investors are underestimating the strength of a business that derives about 90% of its revenue from existing customers and continues to generate significant free cash flow. The bank raised its earnings forecasts by 7-8% over the next three years.
Concerns that recent growth had been driven mainly by higher stamp prices were felt to be overdone.
Instead, analyst Hai Huynh pointed to a range of growth drivers including tracked delivery, premium card formats, gifting and international expansion. Tracked delivery now accounts for about 44% of UK card-only orders and is expected to exceed half next year.
The appointment of Catherine Faiers as chief executive is also not expected to bring a major strategic shift, with Huynh seeing management's focus as remaining on improving execution, strengthening customer relationships and making better use of the group's existing capabilities.
At 12.5 times forward earnings, Moonpig's valuation was viewed as "undemanding" for a company delivering steady revenue growth, double-digit earnings growth and continued capital returns to shareholders.
