This FTSE 250 stock keeps blowing broker forecasts out of the water

Jon Smith considers the ever-increasing share price targets for a FTSE 250 stock that has risen by 120% in the past year.

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It’s been a great year for the Trustpilot (LSE:TRST) share price. The FTSE 250 stock has rocketed by 120% over this period and currently sits at 190p. A big part of this was strong financial results, with the business finally pivoting to becoming profitable in 2023. Yet with the share price continuing to march on, price targets are frequently being exceeded.

What the experts think

Most top banks and brokers have research teams that study stocks and put out their own share price forecasts. Most are set with a 12-month time horizon.

Several analysts have been scrambling to keep up with the performance of Trustpilot over the past year. For example, the team at JP Morgan had a target price of 140p this time last year. This was increased to 190p late last year and is now at 250p. This suggests further gains could be possible for the company.

Another case is Peel Hunt. This time last year the forecast was set at 165p. It was increased at the start of this year to 200p but has been raised again following the 2023 results from March. The current forecast is 250p.

In fact, from all of the share price forecasts that I can see, no major bank or broker has a target below 190p (which is roughly where the stock currently trades).

Fundamental positives

I don’t want to simply buy a stock because it has a lot of positive forecasts out there. These are just price predictions and have no guarantee of being correct. That’s why I have to take them with a pinch of salt.

With that being said, if my view agrees with other investors out there, it’s a big tick in the box when considering whether or not to buy.

My positive view on the stock is based around the fact that the firm has successfully reached a big pivot point. This is the fact that after years of losses, it posted a $7.1m profit for 2023.

The business has been steadily growing revenue for years, but operating costs prevented it from getting to a profit after tax. However, it has now reached a point whereby revenue is enough to cover this. Continued growth in site traffic has helped here. For example, monthly unique users on the platform rose 30% versus 2022.

Points to remember

Even though I think the stock could outperform over the coming year, I’m slightly cautious. Of course, any stock that has risen so much in such a short period of time has the potential to ‘correct’ lower as investors look to bank some profit.

I’m also aware that there’s a cap on how large Trustpilot can be in the current form. A review site is a good business idea, but it’s not going to be the next member of the trillion-dollar market cap club!

Even with these risks, I’m seriously considering adding it to my portfolio and feel investors should consider doing the same.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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