Last checked at 
(Sharecast News) - Analysts at Canaccord Genuity raised their target price on electrical retailer AO World from 52.0p to 75.0p on Wednesday after the group's trading update last week led the broker to adjust its FY24-26 estimates.
Canaccord Genuity said while the update provided a beat on consensus adjusted pre-tax profits, AO had still missed revenue expectations, with FY23 revenue set to decline 12%. Moving forward, the Canadian bank also believes AO's +10-20% top-line growth targets look "overly ambitious", while the margin recovery story has more or less played out.
Therefore, trading on an FY25E FCF yield of just 4.1%, Canaccord believes AO World to be "overvalued", leading it to retain its 'sell' recommendation for the stock.
"While the headline EBITDA multiple appears undemanding, post over £20m of lease charges associated with an inefficient hub and spoke model, in our view, FCF narrows to just £24m (conversion on EBITDA of just 35%), leaving AO trading on a cash FY25E PER of c.25x. Therefore, with easy wins made and questionable growth targets, we retain our 'sell' recommendation," said Canaccord.
Reporting by Iain Gilbert at Sharecast.com
