Trustpilot (TRST): 220p

Market cap: £910 million

‘Trustpilot’s re-rating has only just begun – buy the stock now’. This is what we wrote at the beginning of 2024 when the stock traded at 161p. The shares ended the year at around 300p.

Donald Trump’s economic policy has sent stock in the goods and services ratings platform plunging of late. In uncertain times, investors typically retrench from higher growth, higher risk investments to more stable and reliable options, and this is what has helped send Trustpilot stock spinning lower, falling from 355p in February to 220p now.

Shares believes this has created a new entry point opportunity for this exciting growth company, and we are not alone. In March, analysts at UBS flagged the opportunity to clients when the shares were trading at 278p, noting that full year results from the online reviews platform were comfortably ahead of average City forecasts, following a year of ‘continual upgrades with each set of results’.

‘This is indicative of the organic upgrade cycle that the company has been on over the previous 12 months’, wrote analysts at Berenberg in April, with the stock named as one of the investment bank’s top tech picks in the UK market.

‘Progress in North America has been a key positive’, where second half bookings growth was 29% and net dollar retention rates have improved dramatically in the region, to the point that it is now above the group average.

Berenberg thinks the stock could hit 420p over the coming 12 months or so, that’s 90% upside.

TRUSTPILOT BACKGROUND

FTSE 250 firm Trustpilot listed in London in March 2021 with a market capitalisation of £1.08 billion and a 265p share price.

Like many digital commerce businesses, Trustpilot’s business grew rapidly during the pandemic. Today, the company hosts more than 300 million reviews and annual recurring revenues were running at $230 million at the end of 2024. Or in other words, about 93% of $246 million 2025 forecast revenue is covered from day one, around 80% for 2026’s $287 million consensus estimate, according to Stockopedia data.

Thousands of businesses now turn to Trustpilot for customer transparency and the underlying consumer data analytics it provides. Crucially, this creates valuable network benefits. The more consumers that use the platform and share their own opinions, the richer the insights the company can offer clients.

Done well, this creates a virtuous circle where consumers feel drawn to Trustpilot because it is where meaningful services are listed and reviewed, and the more consumers that use Trustpilot, the more businesses will feel they cannot afford not to be on the platform.

Independent consumer studies have found that 87% of consumers in the UK and US find ads more trustworthy with the Trustpilot logo and star rating than without, while 63% of EU consumers agree that a good Trustpilot score makes them more likely to buy from a brand.

Fierce competition from the likes of New York-listed Yelp (YELP:NYSE) and others is a certainty although the Trustpilot brand is already rooted in the minds of millions of consumers worldwide.

WHAT’S BOTHERING THE MARKET

One area of concern has been rising investment costs not passing through the P&L, yet this does not seem out of kilter with what management indicated through 2024. It has been putting capital to work with product improvements and development. We believe this will be less lumpy going forward and we like that Trustpilot is focusing on a product roadmap to retain and grow its market presence.

The other obvious worry is that Trumponomics will send the US and likely the global economy into recession. Whether that comes to pass is anyone’s guess, but while Trustpilot will doubtless have to adjust in that event, we believe it has levers to pull to come out the other side in great shape. Free cash flow yield, a measure of how much cash a company converts from revenues, is set to almost triple over the next three years.

Keep the top line growing as planned and profits will come thicker, and faster as operating margins dramatically improve. Last year, these were calculated at 6.9% by Berenberg analysts. They are expected to be 8.8% this year, 9.8% in 2026, and 10.8% in 2027.

As is stands, Stockopedia’s consensus forecasts data implies 2025 and 2026 EPS (earnings per share) of $0.04 and $0.053, equating to 3p and 4p roughly, or at a three-year average growth rate of close on 25%, way above the market average.

So, while the current 12-month rolling PE (price to earnings) multiple stands at a lofty 65, this is a business which should grow into its valuation over time.

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