Canaccord Genuity lowers target price on GB Group

(Sharecast News) - Canaccord Genuity cut its target price on GB Group from 400p to 365p on Wednesday, saying additional investment in the company's new Go platform would weigh on near‑term margins despite a solid recent update.

The Canadian bank said an extra £6m of spend had disrupted what it had hoped would be "uneventful" interims, though it viewed the investment as sensible given strong early customer uptake. Go has been designed to consolidate GBG's identity modules into a low‑code orchestration platform, enabling faster customer onboarding and quicker deployment of new features.

Canaccord pointed out that GB Group management has indicated that Go can be supported within its existing research and development budget beyond FY27, reinforcing the one‑off nature of the spend. However, the temporary increase in operating costs means FY27 margins were now expected to fall roughly two percentage points to 21-22%, leaving earnings per share broadly flat year‑on‑year and lagging mid‑single‑digit revenue growth.

Canaccord also highlighted that a year of flat earnings typically leaves the shares range‑bound, but argued that valuation remained compelling, with the stock trading near all‑time‑low multiples, generating an 8% free‑cash‑flow yield and showing signs of sustained organic growth improvement. It also noted ongoing strategic and M&A takeout optionality.

The broker added that its new 365p target price implies close to 80% upside potential, based on a 17x CY27 peer‑group price-to-earnings ratio.

Reporting by Iain Gilbert at Sharecast.com

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