Morgan Stanley downgrades Rentokil to equal-weight, cuts target 16% to 420 pence

Investing.com·29 Sep 2026·

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Morgan Stanley downgraded Rentokil Initial to "equal-weight" from "overweight" and cut its price target 16% to 420 pence from 500 pence, citing tougher competition in the U.S. pest control market and lower valuation multiples among peers. The brokerage said private equity-backed operators have rapidly expanded their share of the U.S. market, increasing competition for Rentokil and rival Rollins, with private equity firms now accounting for more than 16% of revenue among the top 100 pest control companies, up from 1% a decade ago, while Rentokil and Rollins together account for 51%. PE-backed buyers accounted for more than half of U.S. pest control transactions over the past three years, compared with less than 10% a decade earlier, and average deals now command 2.5 to 3.5 times enterprise value to sales, versus 1 to 2 times between 2005 and 2015. Rentokil has cut its 2026 acquisition spending guidance to about $120 million from roughly $200 million, Morgan Stanley said, limiting another potential avenue for growth. The brokerage also flagged a potential challenge from changes in online search, saying that in a test across 25 U.S. markets, independent operators accounted for 79% of 150 top-three recommendations generated by large language models, compared with 8% for Rollins and 7% for Rentokil. Morgan Stanley maintained an "overweight" rating on Rollins but cut its price target to $45 from $60, and said it saw limited scope for a near-term re-rating of Rentokil, which is due to report a third-quarter trading update on Oct. 22.