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UBS reckons it’s all starting to come together for; upgrades to ‘buy’

The benefits of recent investments should start to come through soon, competitive threats are receding, and insurance premiums look set to rise throughout this year
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Shares are up by a third so far this year, but they’re still worth a punt, says UBS Group PLC (LON:MONY) shares nudged higher on Wednesday after UBS analysts said the price comparison site was about to enter a “virtuous circle”.

The stock is already up by a third so far this year, but the Swiss investment bank has still moved to upgrade its recommendation to ‘buy’. It has also hiked its price target by a third up to 415p (from 305p).

READ: reports 20% jump in revenues

The number crunchers are predicting revenue and earnings per share growth to kick on over the next few years following a period of heavy investment into improving the customer journey.

“As conversion rates improve and user engagement initiatives come through, we now think earnings growth can accelerate to double-digit by FY20, with high single-digit revenue growth and operational leverage,” read a note to clients.

Competitive threats receding

UBS added that the market “appears overly pessimistic” over the impact of competition, and its analysts think the threat from credit score providers such as ClearScore “could be receding”.

“Through 2018 we were worried that the rise of credit scoring apps like ClearScore could translate into further share loss for MONY in the credit card/loans segment.

“Peaking app ranking for ClearScore (according to UBS Evidence Lab data) and MONY rolling out its own credit scoring tool since the beginning of 2019 make us much more positive going forward on MONY's money vertical.”

Insurance premiums set to rise

An indirect benefit to Moneysupermarket is the expected pick-up in end markets, particularly insurance.

Claims inflation has outpaced premium inflation of late, but UBS forecasts the two will catch up by the end of the year.

“In 2016 and 2017, MONY benefited from a hard insurance cycle with double-digit premium inflation.

“The pricing outlook on insurance is now highly uncertain despite +5% annual claim inflation, but we are already well in the insurance soft cycle with the risk now lying on the upside.” shares rose 1.5% to 371p on Wednesday afternoon, not far off all-time highs.

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