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AO World – argues “Continued Growth and Strategic Progress”, BUT…

By Steve Moore | Thursday 12 January 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

UK and Europe online electrical retailer, AO World (AO.) headlines a trading update for the quarter to 31st December “Continued Growth and Strategic Progress”, though the shares are currently approaching 8% lower, at 170p, in response.

The updates notes revenue up 12.3% for the quarter year-on-year, with UK revenue +8.9% and the company’s earlier-stage Europe operations (in constant currency) +28.4%. It adds “we expect the group's performance for the full year to fall within the guidance previously given (credit for stating this of revenue of £700.3m-£735.9m, though not for also using bullshit earnings (adjusted EBITDA of £2.4m losses to £4.7m for the full year)) but remain cautious about the final quarter”.

Hmmm. The caution is with a noted “uncertain economic outlook” and “currency impacts on supplier pricing”, though the company concludes with that “we remain confident that our market leading proposition will continue to drive customers to experience the AO Way”.

However, particularly with the self-admitted reasons for caution, I remain not confident in the valuation here – a market cap still comfortably in excess of £700 million currently.

I also note FCA data showed short positions (as of yesterday) by TT International (0.88%), Artemis (0.64%), Schroder (0.63%) and JPMorgan (0.50%). My stance also remains sell.

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