Proactive Investors - THG PLC (LON:THG) shares are motoring today and and there could be more to come according to analysts at Bank of America (NYSE:BAC).
The bank has set a 125p price target and reiterated a buy rating, helping drive shares 5.2% higher to 69.08p.
BofA noted while the revenue decline in recent first half results was greater than expected - especially in the Beauty division - the worst now appears to be behind.
In the UK, the two largest headwinds - falling online penetration and low consumer purchasing power - began to show signs of improvement for the first time since 2021 this summer, it pointed out.
“Management called out positive growth in Beauty starting in August, and we expect group-level growth to turn positive again in 4Q23 as Beauty improves with manufacturing revenue picking up again,” the broker said.
BofA sees reasons for optimism at all three core divisions.
In addition to a return to positive growth in August, the Beauty division should see improved margins in the second half of the financial year as the margin-accretive manufacturing business ramps back up following destocking throughout much of 2022 and 2023.
BofA thinks current prices, input costs should remain a tailwind for the Nutrition division for second half of the financial year and beyond, allowing the flexibility to re-invest in pricing to drive growth.
Ingenuity's strategic shift continues as THG exits smaller, less profitable contracts leaving it on track to add £1 billion gross merchandise value in new contracts in the financial year.