AO’s impressive H126 results show strategic, customer-focussed progress. 14% revenue growth reflects market share gains, and Adj. PBT rose 10% despite payroll cost headwinds.
AO's differentiated 5* membership programme and sustained 5* customer service underpin its success, whilst improved profit trends in mobile and musicMagpie contribute to the positive outlook.
We raise our FY26E Adj. PBT and Adj. EPS by 4%-6% and forecast AO will generate over £150m cumulative FCF FY26E-FY28E and a 21% CAGR in Adj. EPS FY26E-FY28E. Yet it trades on only c.14x cal 2026 PER, falling to c.11x cal 2027 PER, which we believe significantly undervalues AO’s growth prospects. Our Fair Value/ share increases for the second time in three months, from 160p to 170p (a cal 2026 FCF yield of c.5%).
