Cavendish sticks with 42p target as Pathos shares recover ground
Published: 03:49 06 Aug 2026 EDT
Cavendish has kept its 'buy' rating and 42p target price on Pathos Communications Plc (LSE:NEWS), arguing the shares are mispriced after a sharp and unexplained sell-off.
The shares rose 6% on Thursday after the public relations technology company reported record monthly revenue of more than $1.8 million in July.
Analyst Andrew Renton put the implied upside at 79% from Wednesday's closing price, a level that left the AIM-quoted company valued at £15.7 million.
Cavendish first published its 42p target in January, when the shares stood at 32p, and has left both the target and its earnings forecasts unchanged since.
The stock has fallen 25% in the last month, a slide chief executive Omar Hamdi said he could find no reason for when he issued the trading statement.
Renton's case rests on Pathos being one of the purer listed exposures to what he calls AI enablement, pairing proprietary technology with a pay-on-results model aimed at smaller businesses priced out of conventional public relations.
He put that addressable market at more than 400 million small and medium-sized companies.
The demand driver he identifies is Generative Engine Optimisation, the practice of making a company visible in answers produced by large language models rather than in search results.
Cavendish cited a Gartner forecast that global public relations spending will double by 2027.
The broker also pointed to Pressella, the company's artificial intelligence sales tool, which it said achieves a success rate seven times that of human colleagues in sales development.
On the numbers, Cavendish forecasts revenue of $14 million this year and $15.3 million next, with adjusted earnings before interest, tax, depreciation and amortisation rising from $2.9 million to $4.8 million. That implies margins widening from 21.9% to 31.3%.
Note the shape of that growth, though. Revenue is forecast to expand 7% this year and 9.6% next, so the earnings improvement comes largely from operating leverage rather than sales momentum.
The 7.9 times adjusted earnings multiple Renton describes as undervalued is the 2027 figure; on this year's forecasts, the shares trade closer to nine times.
Cavendish is Pathos's nominated adviser and broker, and the company is a corporate client.
