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Moneysupermarket's new strategy a game changer, says Liberum as it upgrades to 'buy'

Liberum raised its recommendation on the company to ‘buy’ from ‘hold’ and raised its target price to 500p from 295p
Moneysupermarket invested heavily in marketing to attract customers to the website Group PLC’s (LON:MONY) new strategy to a more subscription-style model is a game changer, Liberum said as it turned positive on the stock.

Shares in the price comparison website gained 2.5% to 306.9p in morning trading as Liberum raised its recommendation on the company to ‘buy’ from ‘hold’ and raised its target price to 500p from 295p.

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The firm, which offers deals on credit cards, insurance, and utilities, is trying to reinvent itself by making itself more personalised and moving deeper into product areas like mortgages.

“Our view is the company’s new strategy will transform the model into something more akin to a ‘subscription’-style business with a wider potential market, reducing marketing cost growth, and significant opportunities in the mortgage market,” LIberum said.

Liberum said Moneysupermarket’s current business model is “quite volatile and rather unpredictable”, requiring heavy marketing spending while being vulnerable to disruption by outside factors like changes to Google’s search algorithms. The broker thinks the new strategy will see the company become a more predictable and stable business.

“We have always been cautious on the price comparison website (PCW) model, because we have seen it as one that has relatively low barriers to entry, little customer loyalty and requires constant marketing to attract customers onto the website,” it said.

“However, we see Moneysupermarket's new strategy as a game changer, promising to re-invent the model with a personalised service that should, if successful, remove many of these issues.”

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