Citi slashes WH Smith price target on Covid-19 disruption

Citi slashed its price target on shares of WH Smith to 770p from 2,570p on Thursday as it downgraded its profit forecasts, citing the disruption caused by government measures to contain the coronavirus.

The bank said it continues to view the travel business as an attractive growth prospect in the longer term.

However, in the medium term, it expects further disruptions across the UK and international travel segments, as government containment measures continue and airlines cut capacity.

"While valuations look attractive relative to history, given the unclear duration of the virus, with a scaled vaccine solution unlikely in the near term and an unclear timeline on containment measures, we believe this gives limited near-term catalysts for a re-rating," it said.

"Taking our FY21E earnings per share on a trough multiple, we still see a circa 40% downside risk to the share price."

The bank, which maintained its ‘neutral’ rating, cut its FY20 pre-tax profit estimate by 30% to £116m, and its FY21-22 estimates by around 18%.