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On Tuesday, Citi analyst Catherine O'Neill updated the price target on Hemnet Group AB (HEM:SS), increasing it to SEK 384 from SEK 372, while keeping a Neutral rating on the stock. The revision comes as the firm anticipates the company's fourth-quarter results for 2024.
O'Neill's report highlighted adjustments to Hemnet's financial forecasts, taking into account a rise in the Average Revenue Per Listing (ARPL). The analyst expects the demand for Hemnet's premium products to persist, which has influenced the updated revenue and adjusted EBITDA estimates for the fiscal year 2024 by approximately 2%. Despite this positive adjustment, there is a noted softening in the year-over-year listing volumes for the fourth quarter of 2024.
Looking ahead to 2025, Citi's analysis suggests revenues and adjusted EBITDA may surpass consensus estimates by 3%, driven by a further increase in ARPL, which is projected to be 3% higher than consensus estimates. O'Neill believes that Hemnet's plans to reassess its seller package system early in 2025 could provide additional momentum, as two-thirds of sellers are opting for premium offerings.
The upward adjustment in the price target is supported by a discounted cash flow (DCF) model, which includes a weighted average cost of capital (WACC) of 7.6% and a long-term growth rate of 3.5%. These factors contribute to the revised fiscal year 2025 and 2026 revenue and adjusted EBITDA estimates, which are expected to see an increase of about 2-3%.
In conclusion, while Citi acknowledges the potential for Hemnet's growth and the increased interest in its top-tier products, the firm's stance remains neutral, with the slight price target increase reflecting cautious optimism about the company's financial performance in the coming years.
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