Broker tips: Trustpilot, Chesnara

(Sharecast News) - Trustpilot tumbled on Tuesday after Morgan Stanley downgraded the shares to 'equalweight' from 'overweight' as it argued that AI upside was now better priced in. The bank said Trustpilot remains the clear leader in horizontal consumer reviews where consensus estimates have accelerated in the face of AI disruption. It noted that FY25 results set explicit adjusted EBITDA margin targets of 25% by FY28 and 30% by FY30, versus 15.6% in FY25.

"We continue to believe that path is achievable, with the recent Trust capital markets day reinforcing our view that AI is a net positive for Trustpilot by increasing the value of scaled trust infrastructure as fake content becomes harder to police."

However, following a circa 60% year-to-date share price jump, much of that medium-term upside is reflected in the shares, Morgan Stanley said.

The bank lifted its price target on Trustpilot to 275p from 265p and raised its FY28 adjusted EBITDA margin forecast to 24.9% from 24.5%, but said that with consensus already close to management's 25% target (24.4%), this only implies circa 2-3% upside to targets.

"That leaves a tighter margin of safety given ongoing execution risk around enterprise adoption and scaling profitability in newer markets," it said. "Trustpilot trades on a circa 25% premium to the software basket (versus circa 50% discount in December) and also screens at a premium to the broader network-effect peers on a price-to-growth basis," the bank said. "Therefore, while we view the relative re-rating as justified, we believe the risk/reward is now more balanced and move to equal-weight."

Analysts at Berenberg raised their target price on insurance firm Chesnara from 339p to 373p on Tuesday as they updated their figures to reflect its recent acquisition of HSBC Life (UK).

Berenberg stated that as part of Chesnara's £260m acquisition of HSBC Life, completed in January, the firm had acquired an operation that generates new business and that aligns with its existing product suite, particularly with its open onshore fund.

"Until now we had not included the potential benefit of this new business in our valuation, as we felt that it could potentially dilute the focus of the group and of its shareholders on the value created from life-backbook deals," said Berenberg, which reiterated its 'buy' rating on the stock.

However, given the positive market reaction to the 15 April £2bn Standard Life acquisition of Aegon Life UK, which has seen Standard Life's share price rise by roughly 10%, the German bank now believes that there has been "increased investor interest in new business growth" in UK life insurance.

"While we maintain our forecast 3% DPS growth, in line with Chesnara's 20-year continuous DPS growth track record, we raise our dividend-discount-based valuation to reflect the benefit of the fall in UK equity risk premiums. We cut the discount rate we use to discount future dividend growth from 9.2% to 8.9%," added Berenberg.