Investment View: The boss cashed out, but the price may yet rebound
Our view Buy
Price 185p (+1.1p)
There are two issues hanging over Moneysupermarket, the obscenely successful price-comparison website whose deeply annoying ads are all but impossible to ignore (which is kind of the point).
The first is the fact that in June, co-founder Simon Nixon offloaded roughly 15 per cent of the shares, netting himself £170m, which means he won't need the site. He'll likely have a private banker, or three, running around for him. The second is the recent trading statement, which unnerved investors.
Let's look at the former to begin with. Last month, I advised investors to follow the lead of SuperGroup founder James Holder who netted £20m after dumping 2 million shares in his business, apparently to fund his divorce. It makes all sorts of sense to take a very jaundiced view of businesses where the men at the top are pulling out.
However, Moneysupermarket is different. For a start, Mr Nixon, the university dropout turned financial adviser, has increasingly been taking a back-seat role in the operation.
That's something I view as a positive sign. When entrepreneurs float businesses and retain big stakes, they can sometimes forget that they have partners to deal with who should have the same rights as them and have a right to expect equal treatment.
I'm not saying that's the case with Mr Nixon, but it can happen. It's frequently a positive thing for a businesses when the founder steps back with the aim of enjoying some of the wealth they have generated.
As such, we can't really complain about Mr Nixon cashing in some of his chips. Moreover, his move makes more shares available to the open market for trading (known as improving liquidity) and was accompanied by a juicy special dividend.
Of much more concern would be last week's trading statement, which suggested that all is not well with the money part of Moneysupermarket.
The Government throwing cheap cash at the banks to encourage mortgage lending has come with some nasty side effects. It has crimped savings rates, and that has crimped business for Moneysupermarket because savers now don't want to know.
The site is also suffering from fewer banks putting products on its markets, and intense competition from rivals such as GoCompare, Confused.com and those infernal meerkats.
Google changing its search algorithms favoured them and worked against Moneysupermarket, but now the changes have settled, you can expect to see it working to address its slippage in the search rankings.
Those rivals have also been advertising hard. You're about to see Moneysupermarket's response, but putting back its ad push (and these sites are very ad-dependent) meant sales growth nearly ground to a halt in July.
However, all is not lost. Moneysupermarket's other divisions, travel, insurance and home service, all gained ground.
The company has the financial clout and the wherewithal to step up its game.
While analysts may respond to the statement by tweaking their numbers downwards, falls in the share price, like the 15 per cent tumble last week, are often overdone. As long as the next update contains positive news, it could easily rebound.
As for those banks, competition is gradually coming on stream, with the new banks being spun out of Lloyds and RBS keen to grab new business (and their current "parents" motivated to get back what they've lost).
So Moneysupermarket's travails may be short term, although it would need a significant uptick in consumer confidence (and in consumer incomes) for the site to really fly. Personal loans, credit cards and the like are a big driver.
The shares trade on 17 times this year's forecast earnings, falling to 15 times next year's. Next year's forecast yield (when there won't presumably be a special pay out) should hit 3.7 per cent, which is respectable.
I accept that there are clouds over Moneysupermarket right now. You couldn't quite use the term "profit warning" to describe the trading update, but it was worrying and while it may be an "old wive's tale" it does sometimes seem like trouble in the City comes in threes.
That said, this company could bounce back rapidly, and the shares with it. I'd bet on the latter and make the stock a buy, albeit a risky one.
Jo from Northern Ireland was less than impressed by Russell Brand's attempt to stage a publicity stunt
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
Shock poll shows voters believe Ukip is to the left of the Tories
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
New era of cheap oil 'will destroy green revolution'
Ukip founder Alan Sked and Nigel Farage 'begged Enoch Powell to stand as a candidate'
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
iJobs Money & Business
£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...
£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...
$125 - $175 per annum: Carlton Senior Appointments: Senior Wealth Manager In...
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...