On The Beach on the rise as Berenberg lifts target price
On The Beach got a boost on Friday as Berenberg upped its price target on the stock to 630p from 600p and reiterated its 'buy' rating following the company's in line trading statement and announced acquisition of Classic Collection Holidays.
FTSE 250
19,391.30
17:09 19/04/24
FTSE 350
4,341.08
17:09 19/04/24
FTSE All-Share
4,296.41
17:08 19/04/24
On The Beach Group
153.40p
16:40 19/04/24
Travel & Leisure
7,521.61
17:10 19/04/24
It said the update was testament to both OTB’s differentiated model, which has seen it deliver strong earnings growth even against poor market backdrops and the company’s highly cash generative nature, which should allow it to continue making value-creative acquisitions over time.
It also noted that unlike other travel businesses, OTB does not take any inventory risk in that it never speculatively pre-buys hotel beds or flight seats. In addition, it has very low fixed costs, with a technology-led model and zero stores.
"As a result, in a weaker demand environment OTB: 1) is not burdened with distressed inventory being sold at a loss; 2) has low fixed overheads; and 3) sees its main cost, online marketing, automatically fall (as fewer consumer searches equals fewer paid clicks with Google).
"Backed by those advantages, OTB has consistently delivered strong earnings growth, even where revenue trends have been weaker."
Berenberg also argued that the market is currently ascribing virtually no value to the company’s international rollout. As a result, any positive updates on progress in Sweden could be a further catalyst for the stock.
At 1440 BST, the shares were up 4.5% to 497.50p.