Moneysupermarket.com rebounds on 2020 optimism

Market dynamics look to be improving, but will this mean a better year for shares in the comparison site?

Investors switched back to Moneysupermarket.com (LSE:MONY) today as the price comparison service signalled a strong start to 2020 and potential return to growth at its Money division.

The stock surged 13% to 352p, ending a barren run in which it had fallen by 25% since the middle of July to underperform smaller rival and GoCompare owner GoCo Group (LSE:GOCO).

Today's annual results were in line with expectations, with revenues up 9% to £388.4 million and adjusted earnings of £141.5 million up by a similar level.

This was despite a 14% slump in fourth quarter revenues for the Money division due to a lack of promotional activity in the financial sector, such as current account switching bonuses.

Insurance, which is Moneysupermarket's biggest sector, grew 3% in the quarter despite volatility in its online search rankings. The stand-out performance, however, came from home services after “exceptional rates” of energy switching led to a 36% jump in revenues.

Home services has also started 2020 trading in line with last year's strong comparatives, when there was growth of 70% in the first quarter. As well as the return to growth in Money, the company believes that the broader switching conditions for Insurance will improve.

Amid this growing optimism about market dynamics, the company now expects the group's performance to be weighted towards the second half of the year.

The first half should see the company's MoneySavingExpert brand launch a new energy autoswitching service. This comes on top of the 600,000 Moneysupermarket customers who are already using monitoring services to help them avoid overpaying on their bills.

In September, rival GoCo reported faster-than-expected take-up of its AutoSave initiative, where it automatically switches customers on to the best deal. It will provide further details on the performance in its annual results early next month.

Analysts at Stifel welcomed the update on Moneysupermarket's monitoring service and said that the current share price discount to GoCo looked to be “anomalous”. It currently trades on a 2020 enterprise value/earnings multiple of 11x, compared to 12.8x for its rival. 

The broker added:

“At almost half the underlying earnings rating of Autotrader (for a similar growth forecast), we see considerable value.”

Analysts at UBS are also optimistic about prospects, with a price target of 415p. They said the positive outlook and data points in today's results were supportive of the long-term narrative, particularly in the context of a current weak share price.

Moneysupermarket trades with a 4% dividend yield, but with the potential for a special dividend every second year. Today's annual award increased 6% to 11.71p, with the company reporting it paid £100 million in dividends to shareholders last year.

One area of near-term uncertainty concerns leadership after it emerged last night that CEO Mark Lewis planned to step down after three years in charge.