Prosus (PRX) Stock Analysis: Price Target, Risks, Strategy & More
06 juni 2022 
8 min. read

Prosus (PRX) Stock Analysis: Price Target, Risks, Strategy & More

Dear Happy Investor, are you considering buying Prosus shares? The company is a major player within the AEX. Nevertheless, Prosus has risks and has a certain price expectation. In this article you will find an analysis of Prosus stock. This is purely for inspiration and education. Thus, we do not offer a buy recommendation for Prosus (PRX). 

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On to the Prosus stock analysis!

Stock Analysis: Prosus (PRX)

The Dutch multinational conglomerate, Prosus (PRX), is the international Internet assets division of the South African giant Naspers. It is one of the largest technology investors in the world and a global consumer internet company that operates in over 30 markets, including Brazil and India, leveraging the power of technology. 

Those who aren't familiar with Prosus are sure to be familiar with their partners - their companies improve the lives of around a fifth of the world's population. Since Prosus began, it has helped companies such as Udemy, Meesho, and Avito develop their business models.

Prosus operates and invests worldwide in markets with long-term growth potential and builds consumer internet companies that empower people and enrich communities.

A lot of the company's efforts are focused on building businesses in the payments, online classifieds, fintech, education technology, and food delivery areas in markets such as India, Russia, and Brazil. 

The venture team at Prosus invests in health, blockchain, logistics, and social commerce. Having become one of the largest technology investors in the world through rational analysis and consultation, the company takes an entrepreneurial approach to growth. Whenever possible, Prosus looks to form partnerships with entrepreneurs who are using technology to improve people's daily lives.

Prosus strategy is to connect people to each other and the wider world and create value by improving lives. Prosus has acquired, invested in, or built companies that provide products and services to millions of people every day.

The Prosus operating model is different from many other companies. As investors and managers, they offer value at every stage of a company's life cycle.

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Strengths and Weaknesses of Prosus (PRX)

If you are considering buying Prosus, you need to make sure that you are investing money in a strong company. It is important to look at the strengths and weaknesses of the organization. Below we provide a starting point (not exclusive to).

Strengths of Prosus (PRX)

  • Operations in over 30 countries across the world.
  • Established internet businesses built by experienced entrepreneurs.
  • A strong workforce of more than 12000 employees.
  • PRX Stocks have a great deal of appreciation potential based on the difference between current and average target prices.
  • In the coming years, analysts expect a sharp increase in business volume for the group.
  • The Prosus Group is present in diverse verticals such as information technology, payments, online classifieds, fintech, and food delivery. Prosus has survived disruptions such as the global pandemic in Covid-19 because of this diverse revenue stream.

Weaknesses of Prosus (PRX)

  • The company's earnings growth outlook lacks momentum and is its biggest weakness.
  • In the IT industry, Prosus has high operating costs compared to its competitors. As a result, this can be harder to sustain, considering the new emerging competition from innovative players who are using technology to attract Prosus' lucrative customers.
  • Margins are relatively low for the company as a percentage of sales and without depreciation and amortization.
  • With significant debt and rather low EBITDA levels, the company is in an adverse financial position.
  • The company has a particularly high valuation at current prices.
  • The average consensus view of analysts covering the stock has deteriorated over the past four months.
  • Over the past year, analyst opinions have been re-evaluated negatively. Analyst predictions for the stock have been inconsistent. A dispersed sales estimate confirms the difficulty in tracking the group's activity.
  • The various analysts contributing to the consensus have different price targets. That indicates a difference in the assessment of the company and difficulty valuing it.

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Threats and Opportunities for Prosus (PRX)

According our Prosus stock analysis there are several threats and opportunities. Let us examine a few of them. 

Threats to Prosus (PRX)

The threats of Prosus are as mentioned:

  • Indian taxes and regulations are high.
  • M-commerce is still at a developing stage, with E-media at an early stage.
  • In contrast to the colonial pipeline, modern organizations are highly vulnerable to international hackers, miscreants, and disruptors. Cybersecurity interruptions, data leaks, etc., can seriously hamper the organization's growth in the future.
  • Prosus must adopt a robust strategy against disruptions arising from climate change and energy needs. EU post-COVID-19 recovery funds are being devoted to green technology, which has been identified as a key priority area. As a result of this fund, Prosus can take advantage of it. However, it will also bring in new competitors.

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Opportunities for Prosus (PRX)

Following are the Opportunities for Prosus (PRX)

  • With the popularity of Bitcoins and other cryptocurrencies as asset classes and transaction mediums, Prosus has gained new opportunities. Compared to its existing system, Prosus can target international markets with much fewer capital restrictions.
  • Due to the widespread use of remote working technology during Covid-19, Prosus can expand its area of talent hiring. A report by McKinsey Global Institute indicates that 20% of high-end workers in fields such as fintech and information technology will be able to work from remote locations continuously. For Prosus, this is a wonderful opportunity to hire the best people regardless of their geographical location.
  • By using analytics and artificial intelligence, Prosus can improve the customer journey. Providing automated chats can help consumers solve their problems, provide online suggestions for maximizing the benefits of the products and services, and enable them to build a community where they can work together to develop new features.
  • As a result of online learning technologies, Prosus can now provide its employees with training and development worldwide. The result will be not only a reduction of training costs but also an integration of employees around the world with corporate culture, ethos, and standards.

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Risks analysis of Prosus (PRX)

If you want to Buy or sell Prosus (PRX) stock, you should deeply analyze Prosus (PRX) risk analysis. The company's market cap is 98.38B, and the current price of PRX is €46.24. 

Naspers owns a majority stake in Prosus, and it is listed on the Amsterdam Exchange (AEX: PRX), the Johannesburg Stock Exchange (XJSE: PRX), and a2X Markets (PRX.AJ). 

Following is the risk analysis of Prosus (PRX)

  1. The stock price has been highly volatile over the past three months. PRX's share price has been more volatile over the past three months than 90% of Dutch stocks, typically moving +/- 11% a week.
  2. PRX's weekly volatility (11%) has been stable over the past year, but it is still higher than 75% of Dutch stocks. 
  3. Over the next three years, earnings are expected to decline by an average of 47.8% per year.
  4. Since last year, shareholders have been diluted substantially.

Price Target of Prosus (PRX)

According to Tip Ranks, based on analysts' offerings, the average price target for Prosus (PRX) stock is $85.41, with a high estimate of $117.92 and a low estimate of $53.60.  

According to Market Screener, based on analysts' offering, the average price target for Prosus (PRX) stock is 86,69 €, with a high estimate of 125,00 € and a low estimate of 50,00 €.

The price prediction for Prosus shares is apparently very favorable from analysts. Nevertheless, there are uncertainties and risks, including rising interest rates and inflation. Also, operations in Russia will be detrimental to this company's earnings outlook. All in all, the financial valuation seems like a long-term opportunity, but as far as we are concerned, there are better opportunities at the moment.

Conclusion: to buy Prosus or not?

Buying Prosus shares implies that you invest in a diversified portfolio with dozens of (promising) internet companies on a global level. Prosus acts as a technology investment fund. This offers risk diversification. 

On the other hand, the investment strategy has real risks. After all, investing in internet companies at an early stage can also lead to substantial losses. Competition and innovation are particularly important developments. 

The financial valuation of Prosus shares seems favorable at the moment. Analysts expect a price increase from this level in the long term. Still, we see some more uncertainties, including potentially lower earnings (in the short term) because of recent events.

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