BofA Initiates Ionos with 'Buy' Rating, Citing Sovereign Cloud Demand and 17% EPS Growth Outlook

BofA Global Research on Monday initiated coverage of European web-hosting company Ionos Group SE (IOSn) with a “Buy” rating, setting a price objective of €37. The target implies a potential 29% upside from the stock's last closing price of €28.60.

An 'Attractive Earnings Compounding Story'

Analysts at the bank described Ionos as an "attractive earnings compounding story," projecting a strong growth trajectory. BofA forecasts the company's revenues will grow at a compound annual rate of approximately 8% from 2025 to 2028, with adjusted earnings per share (EPS) compounding at a significantly faster rate of 17% over the same period.

The bank noted that Ionos currently trades at a material discount to its peers. At 8 times its estimated fiscal year 2026 EV/EBITDA, Ionos is valued well below web specialist peers at 14 times and European software companies at 11 times, despite its faster projected EPS growth.

Sovereign Cloud and AI Seen as Key Catalysts

BofA identified three primary drivers for its bullish thesis:

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• AI-driven upselling opportunities within the company’s Web Presence & Productivity division.
• Cross-selling existing customers into higher-value adjacent services.
• A reacceleration in its Cloud Solutions segment, fueled by demand for AI and sovereign cloud services.

The report highlighted the importance of the German government's ITZBund contract, which is expected to ramp up through 2026. BofA estimates the total contract value could be between €100 million and €150 million, helping to boost the Cloud Solutions segment's growth to approximately 12% in the medium term.

Assessing AI Disruption and Market Risks

While acknowledging the disruptive potential of artificial intelligence, BofA analysts believe Ionos will ultimately be a "net beneficiary." They assess the AI disruption risk to the company's core Webhosting and Domains segments, which account for over 55% of revenue, as low to moderate.

However, the bank also outlined several key risks to its forecast. These include the potential for AI-native tools to commoditize website creation, intensifying competition from rivals like Wix and Squarespace, and the threat of hyperscaler cloud providers limiting Ionos's ability to capture the sovereign AI market.