Liberum sees two potential groups of buyers – private equity groups and portal groups in the automotive and/or property space.
READ: Gocompare.com chairman Sir Peter Wood ups total shareholding in price comparison group to 29.9%
The broker said possible candidates that could be interested in buying GoCompare are AutoTrader, eBay and CarGurus.
It does not think GoCompare would be bought by another price comparison website like Moneysupermarket.com Group PLC (LON:MONY) or CompareTheMarket but believes there may be an opportunity to be merged with a smaller player like confused.com.
A possible acquisition is one of the reasons Liberum decided to raise its rating on GoCompare to ‘buy’ from ‘hold’ and hike its target price to 100p from 75p.
Possible WeFlip uplift
Another reason for the upgrade, is a potential uplift of GoCompare’s WeFlip technology, which automatically switches users to the cheapest energy tariffs.
Liberum expects WeFlip to generate about £17mln of revenues by 2022, making up about 9% of total revenue.
“Our view is that only a minority of consumers will be willing to give WeFlip the authority to switch services automatically and that energy companies, and others in the future, will be wary of signing up for a service that dramatically facilitates switching (under the WeFlip model, consumers sign up and are automatically switched onto better plans while services such as Moneysupermarket.com and CompareTheMarket alert the consumer but leaves the latter with the final decision),” Liberum said.
“However, if we are wrong and WeFlip is a resounding success, then it would be transformational for GOCO, especially as the drop through to profits would be high and a large take-up of WeFlip would have a beneficial effect on marketing costs, as GOCO would not need to market as much as customers are already signed up to changes.”
Brexit uncertainty to help price comparison websites
Liberum also expects price comparison websites to benefit from the increased political and economic uncertainty surrounding Brexit because consumers will be seeking cheaper deals.
Despite the upgrade, Liberum still prefers Moneysupermarket.com to GoCompare in the price comparison website sector.
“In our view, Moneysupermarket has greater scale and more potential to monetise its customer base."
In late morning trading, shares rose 2.4% to 78.40p.