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Investing.com -- J.P. Morgan in a note dated Tuesday has updated its outlook on UK small- and mid-cap internet companies, noting the sector has been “hard hit and highly volatile YTD (-17% vs FTSE250 +5%), arguably opening opportunities through the seasonal shift.”
Institutional outflows, sluggish economic growth, and uncertainty around the upcoming Budget and potential tax changes are weighing on the sector.
Auction Technology Group remains a ‘top pick,’ with an overweight rating. J.P. Morgan said while the company experienced a “short-term setback” following its Chairish acquisition and a disappointing trading update, “operational execution on conversion and take rate development - key pillars to ATG’s earnings algorithm - are progressing at pace (positive in Q3),” with sustained growth in value-added services.
Shares trade at 5.8x EV/EBITDA 27E and yield 8% free cash flow, which J.P. Morgan said “n discounting a material downside scenario in our view.”
Auto Trader retains an “underweight” rating. J.P. Morgan noted valuation is “now at a more manageable range - on 16.3x EV/EBITDA 26E (vs blended peers on 18.4x) though await better line of sight on management’s ability to navigate a still challenging first half.”
H1 2026 operating profit is projected at £197m, in line with consensus, with strong consumer demand and tight supply creating a high bar for H2 delivery.
Future remains “overweight,” with J.P. Morgan noting the company’s Growth Acceleration Strategy is “starting to bear fruit.”
CEO Kevin Li Ying and CFO Sharjeel Suleman are driving operational efficiency and rational capital allocation.
J.P. Morgan expects the upcoming trading update on September 25, to underwrite consensus forecasts of £206m FY operating profit, with shares down 24% YTD and trading at 4x EV/EBITDA 26E.
Informa retains an “overweight” rating, with potential catalysts including organic growth focus, Taylor & Francis disposal, accelerated deleveraging, and executive alignment to shareholder interests.
J.P. Morgan highlighted the 2025 Capital Markets Day as a key event, adding that these steps “ leave room for both 1) upgrades to consensus (JPMe FY25/FY26 adj. operating profit LSD% ahead of consensus) and 2) a narrowing of the valuation discount to peers.”
THG has been upgraded to “neutral,” as J.P. Morgan sees “first signs of improved performance following a period of extensive strategic evolvement.”
Q2 organic growth stood at 0.9%, with H2 2025 projected at 4.6%. Strategic disposals and the THG Ingenuity demerger aim to strengthen core operations, with shares trading at 6.7x EV/EBITDA 26E, down 18% through 2025 and 45% over two years. Following the upgrade, THG stock jumped over 4%.
Trainline is “neutral,” supported by a better-than-expected H1 trading update and a £150m share buyback, but regulatory consolidation of UK train platforms may limit re-rating potential.
YouGov remains "neutral," with J.P. Morgan citing “heightened price competition and macro-driven pressure to client budgets” and ongoing initiatives in leadership, products, and cost optimization that will take time to show results.
J.P. Morgan said valuation dispersion and tight consensus expectations mean sector performance hinges on operational execution and earnings stability, with shareholder returns and potential takeovers remaining upside factors.