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Investing.com -- Analysts at J.P. Morgan in a note dated Wednesday has initiated coverage on YouGov (LON:YOU), an international online market research data and analytics technology group, with a “neutral rating.
Shares of the UK-based company were up 4.8% at 06:35 ET (10:35 GMT).
The initiation comes at a time when YouGov holds a competitive position in the market research industry.
The analysts acknowledge YouGov’s strong standing in an attractive end-market but point out that the company is facing near-term disruption.
YouGov is seen as a challenger in the $54 billion market research industry, possessing a competitive advantage through its proprietary panel, connected data-set, and syndicated model, with the opportunity to consolidate a fragmented market.
However, the operational performance of YouGov has been challenged over the past 12 months. J.P. Morgan notes that this has resulted in volatile financial guidance and shares trading at a 10-year low.
While the analysts at J.P. Morgan are constructive about YouGov’s potential to benefit from structural growth and consolidation in an attractive end-market, they argue that a lack of direction is creating a disconnect to the group’s medium-term financial ambitions. This observation is made before a new CEO and strategic leader is found.
J.P. Morgan’s report also highlights that YouGov’s shares are down 72% over the past 12 months, and the valuation is at a 10-year low.
Despite this, J.P. Morgan suggests that the risk/reward balance is relatively well-balanced at the current levels, with limited catalysts for a near-term share price outperformance.
On a more positive note, J.P. Morgan indicates that YouGov remains highly cash generative with scope to launch a share buyback and that the business could be a potential takeover target.