Since Trustpilot’s listing, the stock is up almost 60%. Despite this rise, the shares remain on my watch list. Here’s why.
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Last month, the company released a short but sweet trading update. It’s worth noting here that it intends to announce its half-year numbers on 15 September. I’ll be watching out for this. But in the meantime, it gave investors an indication of what could be in store.
The firm expects to deliver total revenue of $62m in the six-month period. This is growth of 31% compared to last year and 22% on a constant currency basis. It uses the annual recurring revenue or ARR metric as well. Trustpilot reckons its ARR for the half-year will be $134m versus $99m in 2020, representing a 27% rise in constant currency.
The acceleration of the business has continued into 2021 as it expected. Bookings growth is likely to be 37% higher over the prior year. The company also reiterated its guidance for high-teens constant currency revenue growth for its full financial year, which is in line with its 2020 bookings growth.
These numbers are impressive and it appears that when Trustpilot does report all of its numbers in September, the results could be received by investors positively. But there’s no guarantee this will happen.
It has only provided its revenue or top-line figures for the six-months as a taster. There’s no indication what profits will be like. Profitability may have been hit and investors will only know when the half-year report is published in full. Let’s not forget that its financial update in July is the first key news the firm has delivered since it listed.
It’s also worth noting that in its IPO prospectus, the company was loss-making. I reckon this could be the case still, especially given that there was no mention about profits in the update. But this is just me speculating. I’ll have to wait and see what the numbers look like.
While I may only have the FTSE 250 stock on my watch list, some brokers are bullish on the shares. Last month, Berenberg raised its price target on Trustpilot from 385p to 430p. The bank said that the company’s revenue and booking growth numbers were comfortably ahead of its 2021 full-year expectations.
The analysts maintain their ‘buy’ rating and pointed out that while no segmental detail was provided in the update, they believe there has been an increase in US revenue and bookings.
Berenberg also thinks that further disclosure on geographical performance, including ARR, bookings, revenue and consumer engagement, could act as a further catalyst for the shares at the half-year results. I’ll have to see it this turns out to be true.
Should I buy in September?
As I said, I’m only watching the FTSE 250 stock. So I won’t be buying in September ahead of its results. The shares are already trading close to all-time highs. This means that it’s likely to be sensitive to any negative news. I want to see more detail on its half-year performance before I dip my toe in.