Broker tips: Whitbread, EasyJet, M&S
Whitbread was under the cosh on Monday as Barclays downgraded its stance on shares of the Premier Inn owner to ‘equal-weight’ from ‘overweight’.
The bank, which cut its price target on the stock to 4,350p from 4,700p, said: "Weighing up the positives and negatives alongside the utter lack of visibility around Brexit, we cut to EW and see more downside than upside risks currently, especially into H1 results."
Barclays said it sees risks to the shares as it expects consensus earnings per share revisions and sees the implied multiple as far higher than during previous times of macroeconomic weakness.
"On the positive side, we see M&A risk following other bids in the sector for asset-backed businesses and the Brexit outcome will have significant ramifications on the RevPAR/ EPS/share price outlook," it said.
Analysts at HSBC reiterated their 'buy' recommendation for shares of Easyjet stock in the wake of Thomas Cook's decision to file for administration.
On balance, the path chosen by Thomas Cook should help align the sector's returns with its cost of capital, they said, although "overall the airline industry faces a swathe of uncertainties".
At the individual company level, EasyJet would also benefit from favourable conditions in which to launch its new holidays business and the position of its Air France-KLM's partner Virgin Atlantic.
"The removal of the second-largest UK tour operator creates an instant gap in the market and should clearly alter easyJet’s negotiating
leverage with hotels," HSBC said.
"Given its network, easyJet should be well placed to benefit from Thomas Cook’s shut down in Gatwick and Bristol. easyJet is more of a recent arrival in the Manchester market and is not well-positioned in the Birmingham market."
HSBC also expected EasyJet would bid for Thomas Cook's slots at Gatwick airport, while benefiting from tighter short-term capacity on leisure routes such as those to the Canary islands.
Analysts at Berenberg cut their target price on retailer Marks & Spencer from 250p to 160p on Monday, stating they felt the downgrade cycle was "not yet over" for the group.
Berenberg said that with Marks & Spencer's stock down roughly 60% since its downgrade to 'sell' in July 2016, the structural issues were now well known but noted that the 'sell' case was less clear cut.
The German broker acknowledged that M&S was still "the second-largest apparel and footwear brand in the UK", according to Euromonitor, but said that issues in its clothing and home division were "far from fixed".
"With C&H accounting for circa 62% of UK and 46% of group profit, we believe consensus forecasts of flat profit over the mid-term still look optimistic," said Berenberg.
"We are 0%/9%/15% below consensus pre-tax profit in FY20E/FY21E/FY22E. The increase to our EBIT forecasts is driven by IFRS 16, while we cut our underlying PBT estimates by circa 2% in FY20E and 12% in FY21E."
Berenberg added that its 25-30% earnings per share downgrade reflected the capital raise used to fund M&S' joint venture with Ocado Retail.