Berenberg raises price target for On the Beach
On The Beach Group
154.40p
16:44 18/04/24
Analysts at Berenberg upped their target price on shares of UK-based travel retailer On the Beach from 480.0p to 540.0p on Monday, stating the shuttering of Thomas Cook last September had presented the group with "a significant opportunity" to achieve a step-change in market share.
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Berenberg said the precise shape of OTB's upward trajectory remained "unclear" while prices for flights to many beach destinations remained high.
OTB management took the decision to increase marketing spend following the failure of Thomas Cook and while it suggested in December that traffic to the site had increased, conversions had fallen.
The German bank thinks that increasing marketing spend was the right approach, as flight prices should eventually normalise, and OTB should be left front-of-mind for consumers making bookings, but warned that this could well leave earnings with "a peculiar shape" in 2020.
However, despite the potential for short-term volatility, Berenberg still believes OTB "looks attractive" and raised its outer-year earnings estimates as it rolled forward its valuation on the group.
"In our view, management has a solid track record of scaling the business (both organically and via M&A), managing risk factors and innovating to create new areas of growth," said Berenberg.
"EBITDA has already doubled since the IPO in 2015, and with a significant market opportunity ahead, combined with a sizeable net cash position, we back management to achieve much more in the coming years."