AO World - shares 106p soon to be trading 120p to 130p range

The Interim Results announced last Tuesday by AO World (LON:AO.) upped current year expectations, yet again.

And that is despite challenging trading conditions generally.

The group's shares closed last night at 106p, just 8p short of its year's High.

I consider that in early 2026 they are destined to rise above the 114.40p level and head up to trade in the 120p to 130p range.

The Business

With a mission to be the destination for electricals, the Bolton-based group is the UK's most trusted online electricals retailer.

Its strategy is to create value by offering its customers brilliant customer service and making AO the destination for everything they need, in the simplest and easiest way, when buying electricals.

The group has its own in-house logistics business to manage the delivery process and ensure the highest possible service standards.

AO World offers major and small domestic appliances and a growing range of mobile phones, AV, consumer electricals and laptops.

It also provide ancillary services such as the installation of new and collection of old products and offer product protection plans and customer finance.

musicMagpie operates a leading UK re-commerce platform enabling consumers to buy and sell pre-owned consumer technology and media products.

AO Business serves the B2B market in the UK, providing electricals and installation services at scale.

The group also has a WEEE processing facility, ensuring customers' electronic waste is dealt with responsibly.

The Interim Results

The group reported strong interim results for the six months to end-September, with total revenue increasing by 14% to £586m, driven by a 12% rise in B2C Retail revenue to £423m.

Profit before tax grew by 10% to £18m, and basic earnings per share rose to 2.22p.

The company also saw a significant increase in free cash flow to £57m and net funds of £65m.

AO World launched its "Switch24" proposition and upgraded its FY26 profit before tax guidance to be around the top of the previously guided £45m to £50m range.

Outlook

The group's Management is pleased with the progress in the first half, with trading slightly ahead of previous expectations, despite the inflationary headwinds.

In its pre-close trading statement in mid-September, it updated its profit expectation to be between £45m and £50m.

However, given continued positive trading since then, the group upgraded its FY26 PBT guidance to be around the top of that recently narrowed range.

Management Comment

AO's Founder and Chief Executive, John Roberts, stated that:

"These numbers speak for themselves, and it's been another positive six months of operational and financial progress.

I am incredibly excited to have launched Switch24, a new proposition which enables our Five Star members to buy the latest Apple handsets from as little as £17 for an iPhone 17.

This is a first in the UK market, and also allows our members to have the latest iPhone every two years.

It's a great example of AO continuing to disrupt and innovate on behalf of our members to bring them the latest products at the lowest prices.

It's this kind of value and service that is cementing our position as the UK's most trusted electricals retailer with our world class 4.9 / 5 Trustpilot score on over 850,000 reviews.

Our strategy is working and we're as confident as ever about AO's upwards trajectory."

My View

Now at 106p, this £600m-capitalised group's shares remain undervalued.

Market expectations are for the group to see its current year sales, to end March 2026, to rise by 13% to almost £1.3bn, while its adjusted pre-tax profits could improve by over 15% to £50m.

Analyst estimates value this group's shares at 170p, however I stick to my price trading range of 120p to 130p within weeks.

(Profile 17.09.24 @ 106.50p set a Target Price of 136p)

(Profile 18.06.25 @ 100.30p set a Target Price of 120p)