Peel Hunt stripped shares of Bolton-based AO World of their 'buy' rating on Thursday, noting that although the group had seen continued success with its customer-focused strategy, based on where the stock was at present the time had come to downgrade to 'hold'.
Peel Hunt recognised AO World's continued market share and gross margin improvements each year in each market, despite tough macro and FX headwinds, as its investment in customer experience, operational efficiency, and supplier relationships continued to secure the firm's future.

However, the analysts' country-by-country discounted cash flow model yielded a target price of 145p and now the firm had "grown into" that valuation - which they described as 'fair'.

So with nothing having changed since that target price was set, they moved to downgrade their recommendation.

Peel Hunt predicted AO's full-year revenue would rise by 14% versus a year ago to around £796m, which would be slightly ahead of consensus, helping to bring the group's EBITDA loss in line with estimates of roughly -£5m.

Despite the downgrade, with a 58% discount to its UK eCommerce peers and its 45% equity performance since Peel Hunt initiated coverage on AO on 16 November, the analysts said they remained "strong advocates" of the firm.

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