Morgan Stanley downgrades Trustpilot, says AI upside now better priced in

(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."

At 1043 BST, the shares were down 6.1% at 245p.

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