So far this year, the FTSE 250 has endured quite a bit of volatility, particularly around April when the US unveiled its global tariff trade policies. However overall, the UK’s flagship growth index is up slightly by around 2% since January. Sadly, the same can’t be said for the UK tech group Trustpilot (LSE:TRST).
While the stock’s enjoyed a bit of a rally in recent weeks, since 2025, investors have seen close to 15% of their investment wiped out. And those who didn’t buy in until February, this loss is closer to 30%. And yet, despite the downward trajectory, analyst consensus remains very positive.
As of 15 May, six of the eight institutional investors tracking this enterprise have issued a Buy or Outperform rating. And one in particular, Berenberg Bank, has even issued a share price target of 420p. That’s roughly 70% ahead of where the shares are trading today. And if this projection proves accurate, then adding Trustpilot to a portfolio right now could be a lucrative move.
The bull case
Berenberg’s conviction surrounding Trustpilot has been steadily increasing since March 2023. Initially, the investment group issued a forecast of 160p. This was later raised to 270p by September 2024, before landing at 330p in January this year and then finally boosted to 420p in March.
Each target hike was triggered by different reasons. But a common theme has been a steady stream of impressive results. In 2024, the company beat analyst expectations with sales growing 19% to $210.7m and operating profits swinging from a $0.6m loss to a $3.8m profit.
At the same time, net dollar retention rate surpassed the all-important 100% threshold, indicating that existing customers ramped up their spending. And when combined with higher bookings, the groups’ operating cash flow surged by 41%, reaching $29.4m.
This isn’t the first time Trustpilot’s surpassed expectations. And with management guiding for even more double-digit growth in 2025 along with margin expansion, it’s easy to see why Berenburg’s bullish.
The bear case
As impressive as Trustpilot’s performance has been lately, like every investment there are some key risks to consider. The most prominent is the company’s indirect sensitivity to the macroeconomic landscape.
Since its Review Management & Analytics platform isn’t a mission-critical expense for many of its customers, it’s often subject to customer spending cuts when economic conditions worsen. This problem’s only exacerbated by the fact that the bulk of its customer base consists of small- and medium-sized companies that are typically far more sensitive to economic shocks.
In fact, this threat is why Berenburg has previously cut its share price target for Trustpilot in early 2023.
The bottom line
Overall, Berenburg’s optimism doesn’t appear to be misplaced. Trustpilot has its weaknesses. But the highly cash generative nature of its operations and subsequent cash-rich balance sheet give the firm some financial flexibility during downturns.
Having said that, a quick glance at the group’s forward price-to-earnings ratio of 85 quickly reveals that future growth’s already been baked into the current share price. And with such a lofty valuation, volatility’s almost guaranteed if the company hits a small speed bump.
Nevertheless, quality businesses often demand a premium. And in the case of Trustpilot, a closer look seems warranted in my eyes.
