On Tuesday, Morgan Stanley updated its stance on Hemnet Group AB (HEM:SS) stock, raising the price target to SEK415.00 from SEK345.00, while keeping the stock at an Equalweight rating. The revision follows Hemnet's recent quarterly performance, which showcased a significant beat on Average Revenue Per Listing (ARPL), a key performance indicator (KPI) for the company.
The analyst noted that the ARPL's uptick, ranging from 8-13% for the years 2024-2026, has led to an upward revision of Hemnet's financial estimates. Consequently, the forecasted revenues have been increased by 7-11%, EBITDA is expected to rise by 6-14%, and Free Cash Flow (FCF) per share is projected to grow by 9-14%.
The improved ARPL is attributed mainly to the enhanced upselling of Hemnet's Plus and Premium products. This aspect of the business, according to the analyst, has been a challenging metric to track due to limited visibility. Nonetheless, it is evident that multiple factors are contributing to the increased uptake of these higher-tiered services.
The analyst's commentary highlights the importance of ARPL as the most critical KPI for Hemnet, emphasizing that changes in ARPL have significant implications for the company's profit and loss statement. The positive adjustment in Hemnet's price target reflects the firm's expectation of sustained revenue growth driven by successful upselling strategies.
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