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I enjoy looking at analyst ratings from large banks and brokers. Although their viewpoints are subjective, the research members are experts in their field. So when I came across a growth stock from the FTSE 250 that had a host of Buy recommendations with target prices above the current level, I decided to do some more digging.
Predicting more of the same
The stock I’m referring to is Moonpig (LSE:MOON). Over the past year, the stock’s up 46% and is currently trading at 227. Founded back in 2000, the e-commerce company specialises in personalised greeting cards and gifts.
Some might think this growth stock has peaked, with the business model quickly becoming outdated. Yet it continues to prove its doubters wrong, as noted in the latest half-year results. Revenue ticked 3.8% higher versus the same period a year earlier, with gross profit up by 5.1%.
The 11 analysts who currently have a rating on the company all have either a Buy rating or an Overweight recommendation. The average 12-month target price is 297p, with the highest at 330p. If I use the average figure, it would indicate a 31% jump from the current price. Of course, this isn’t guaranteed. But it shows the trend of where analysts think it could go.
Reasons to back the view
One factor why the share price could keep heading higher is the focus on artificial intelligence (AI) and technology. The management team is focusing on leveraging technology to enhance customer experience and drive sales. For example, the company utilises data analytics and AI to personalise offerings and marketing strategies. This can help retain customers and entice them to make a purchase.
Late last year, it even launched AI handwriting, enabling customers to add their personal script for use as a font. Even though some might see this as a gimmick, it’s translating into higher revenue and profit, so I’m not turning my nose up!
Looking forward, I think the stock can continue rising as it expands its product offer and geographical reach. It’s seeing strong growth in Ireland and Australia and is expanding the Experiences division.
One risk is that the non-core offer could become a distraction.Selling experiences has been tough, with the business flagging up “the challenging macroeconomic environment“. This is a risk going forward and might force a strategy pivot at some point.
Momentum’s with the company
The fiscal year end is on Wednesday (30 April), so we’ll get a more in-depth view of the business in coming months. However, on the basis of what we currently know, I think analysts are correct in forecasting a continued share price rally this year. On that basis, I think investors should consider adding the stock to their portfolios.
