Berenberg has initiated coverage of digital media firm GlobalData PLC (LON:DATA) with a ‘buy’ rating and an 820p price target, saying the firm is benefiting from a shift towards online technology-enabled market research.
The broker said consensus expectations for an organic compound annual growth rate (CAGR) of 6% for the 2018 to 2020 financial years “could prove conservative”, adding that a shift toward online data products and services presented companies like GlobalData with an opportunity to grab market share from traditional players in the market research sector.
Mergers & acquisitions?
Berenberg added that when this expectation was combined with evidence suggesting the firm’s business model had “inherent operational leverage”, underlying (EBITDA) margins could expand from 19% in 2017 to 30% by 2021.
Analysts also highlighted estimates that GlobalData had more than £100mln over 2019 and 2021 to spend on mergers and acquisitions, saying that if this was deployed it could increase earnings per share (EPS) estimates for the 2021 financial year by between 13% and 25%.
In lunchtime trading Friday, GlobalData shares were steady around 627.5p, giving Berenberg’s target price a 31% upside.