To this point this yr, the FTSE 250 has endured fairly a little bit of volatility, significantly round April when the US unveiled its international tariff commerce insurance policies. Nevertheless general, the UK’s flagship development index is up barely by round 2% since January. Sadly, the identical can’t be stated for the UK tech group Trustpilot (LSE:TRST).

Whereas the inventory’s loved a little bit of a rally in current weeks, since 2025, traders have seen shut to fifteen% of their funding worn out. And those that didn’t purchase in till February, this loss is nearer to 30%. And but, regardless of the downward trajectory, analyst consensus stays very optimistic.

As of 15 Could, six of the eight institutional traders monitoring this enterprise have issued a Purchase or Outperform ranking. And one specifically, Berenberg Financial institution, has even issued a share price goal of 420p. That’s roughly 70% forward of the place the shares are buying and selling as we speak. And if this projection proves correct, then including Trustpilot to a portfolio proper now might be a profitable transfer.

The bull case

Berenberg’s conviction surrounding Trustpilot has been steadily growing since March 2023. Initially, the funding group issued a forecast of 160p. This was later raised to 270p by September 2024, earlier than touchdown at 330p in January this yr after which lastly boosted to 420p in March.

Every goal hike was triggered by totally different causes. However a typical theme has been a gradual stream of spectacular outcomes. In 2024, the corporate beat analyst expectations with gross sales rising 19% to $210.7m and working earnings swinging from a $0.6m loss to a $3.8m revenue.

On the identical time, internet greenback retention price surpassed the all-important 100% threshold, indicating that current clients ramped up their spending. And when mixed with greater bookings, the teams’ working money movement surged by 41%, reaching $29.4m.

This isn’t the primary time Trustpilot’s surpassed expectations. And with administration guiding for much more double-digit development in 2025 together with margin growth, it’s simple to see why Berenburg’s bullish.

The bear case

As spectacular as Trustpilot’s efficiency has been these days, like each funding there are some key dangers to think about. Essentially the most outstanding is the corporate’s oblique sensitivity to the macroeconomic panorama.

Since its Assessment Administration & Analytics platform isn’t a mission-critical expense for a lot of of its clients, it’s usually topic to buyer spending cuts when financial circumstances worsen. This downside’s solely exacerbated by the truth that the majority of its buyer base consists of small- and medium-sized firms which are usually way more delicate to financial shocks.

In truth, this risk is why Berenburg has beforehand minimize its share price goal for Trustpilot in early 2023.

The underside line

Total, Berenburg’s optimism doesn’t seem like misplaced. Trustpilot has its weaknesses. However the extremely money generative nature of its operations and subsequent cash-rich stability sheet give the agency some monetary flexibility throughout downturns.

Having stated that, a fast look on the group’s ahead price-to-earnings ratio of 85 rapidly reveals that future development’s already been baked into the present share price. And with such a lofty valuation, volatility’s virtually assured if the corporate hits a small pace bump.

However, high quality companies usually demand a premium. And within the case of Trustpilot, a more in-depth look appears warranted in my eyes.