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Whitbread gets boost from Barclays upgrade to ‘overweight’ from ‘equal-weight’


Barclays gave a boost to Whitbread PLC (LON:WTB) on Friday, upgrading its rating for the Premier Inns operator to ‘overweight’ from ‘equal-weight’, calling the group “one of the most attractive recovery plays in the sector” following this week’s coronavirus (COVID-19) vaccine news.

The bank also raised its target price for the FTSE 100-listed firm’s shares to 3,350p, from 2,500p, with the shares currently trading at 2,723p, up 1.4% on Thursday’s close.

READ: Whitbread swings to interim loss but continues expansion in Germany

In a note to clients, Barclays’ analysts said: “We now have a greater level of confidence that 2023 (calendar 22) can see RevPAR back close to prior levels. Operating leverage is high, with every 1% change in RevPAR representing c6% to group EPS in 2022/23, so we upgrade EPS by 43%, leaving us 19% ahead of Bloomberg consensus.”

They added: “With growing confidence around a post-Covid future, we believe investors will increasingly look through the next six to 12 months to recovered earnings. Importantly, unlike some other hotel groups, we believe the recovery back to pre-Covid RevPAR for Whitbread could materialise on a c2-year view, coming from: 1) market share gains; 2) the relative outperformance of budget hotels during recession; 3) relative shelter from a structural shift in business travel due to 90% domestic/50% leisure/100% budget exposure.”

“In addition, we also think WTB is more attractive now than ever for its asset backing (31%-77% potential upside) and Germany optionality. Whitbread becomes our preferred hotels name,” the analysts said.

The Barclays upgrade follows a similar move earlier this week by Citigroup.

Citi upgraded Whitbread to ‘buy’ from ‘neutral’ and yanked its share price target up to 3,400p from 2,350p, with the US bank’s analysts noting the potential long-term structural impact from corporate travel being “disintermediated by virtual meetings and events”.

“We believe COVID-19 presents a significant market share opportunity versus largest branded competitors and independent hoteliers in the UK,” they added, expecting 2021 revenue per available room (RevPAR) to decline 56% and then 16% and 9% in 2022 and 2023 compared to 2020,” they said in a note to clients.

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