On Tuesday, Deutsche Bank adjusted its stance on Moonpig Group PLC (MOON:LN), raising the stock from Hold to Buy and increasing the price target to £2.20, up from the previous £1.95. The move reflects a positive outlook on the company's potential to capitalize on a rebound in consumer confidence and discretionary income.
Moonpig, a leading online greeting card and gift retailer, is recognized for its dominant market position, with approximately a 16% market share. The company's business model, which offers a value-added proposition, is seen to have limited competitive threats. Deutsche Bank highlights Moonpig's impressive financial metrics, including an estimated EBIT margin of around 20% and strong cash conversion rates exceeding 80%.
The upgrade is further justified by expectations of robust growth in UK discretionary income and a sequential improvement in consumer confidence. These factors are anticipated to drive increased spending.
Deutsche Bank has identified three key themes that shape their preference within the discretionary retail sector: online presence, category dynamics, and appeal to higher-income demographics. Moonpig is noted to align with all three criteria.
The firm also points out that Moonpig's valuation, with a calendar year 2025 PE of 13x and a free cash flow yield of 8.4%, is attractive compared to its e-commerce peers. The current valuation is deemed unwarranted, suggesting a potential for the stock to rise. The assessment concludes with a positive outlook on Moonpig's financial performance and market position, underpinning the rationale for the upgraded rating and price target.
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