AO World PLC ’s (LON:AO.) fledgling European business will struggle to establish itself believes Morgan Stanley, which has downgraded the online white goods retailer.
The company sees European growth at 30% over coming years, but the US broker suggests this may not be achievable without significant additional marketing spending.
In its absence, growth overall will be more modest with an acceleration in the core UK market needed to pick up the slack.
That too is unlikely suggests Morgan Stanley.
“In the context of a more cautious macro outlook, a relatively weaker brand and strong competition, we do not see any reason why growth should meaningfully pick up.”
Morgan has trimmed revenue estimates for 2018 and 2019 and is also now at the bottom end of guidance for 2017.
"Our forecasts were already below consensus and we feel expectations for Europe, particularly in outer years, will still need to come down further".
The target price drops to 135p from 170p and the rating to 'underweight' from 'equal'.
Shares fell 3.5% to 154.4p.