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Investing.com -- Trustpilot’s stock has been placed on J.P. Morgan’s ‘positive catalyst watch’ as analysts highlight a potential buying opportunity ahead of the company’s upcoming full-year 2024 results.
The move comes as the online review platform’s shares have underperformed year-to-date, despite strong earnings growth and momentum in key markets.
Trustpilot’s stock is down 12% since the start of the year, compared to a 7% gain for J.P. Morgan’s broader European software coverage.
Over the past month, the stock has dropped 23%, a decline that analysts at J.P. Morgan argue is disproportionate given Trustpilot’s strong financial trajectory.
The brokerage projects a 31% year-on-year EBITDA growth for 2025, with adjusted EBITDA expected to rise from £22 million in 2024 to £29 million in 2025.
Revenue is forecasted to grow from £209 million in 2024 to £246 million in 2025, supported by robust bookings and annual recurring revenue (ARR) growth.
A key driver of optimism is Trustpilot’s expansion in the U.S. market, which has become a focal point of its growth strategy. Recent performance in the region has exceeded expectations, and analysts anticipate that this will be a central theme in the upcoming earnings call.
The company’s strong exit from 2024, with a 21% constant currency ARR growth, underpins confidence in its ability to sustain an 18% revenue increase through 2025.
J.P. Morgan also sees room for further operating margin expansion, forecasting a 130-basis point increase in 2025, outpacing the consensus estimate of 110 basis points.
Cost efficiencies, particularly in general and administrative expenses as well as research and development, are expected to support this margin improvement.
Additionally, Trustpilot recently completed a $25 million share buyback program, and analysts anticipate further capital returns, which could be well-received by investors given the current valuation levels.
The company’s free cash flow is projected to increase from £19 million in 2024 to £25 million in 2025.
Despite these positives, the stock has struggled in recent weeks, a trend that J.P. Morgan attributes this to broader market volatility rather than company-specific weaknesses.
The analysts maintains its above-consensus estimates for Trustpilot and expects that upcoming earnings could serve as a catalyst for share price recovery, particularly if the company delivers earnings and free cash flow upside, sustained U.S. growth momentum, and additional capital return measures.
Trustpilot remains rated ‘overweight’ by J.P. Morgan, with a price target of 350p for December 2026.
The analysts believe that the current share price underperformance is unwarranted and that investors could see meaningful upside following the results announcement.