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Bring me sunshine: Morgan Stanley ups its rating for Thomas Cook to ‘overweight’ from ‘equal-weight’

Morgan Stanley’s analysts said: “We upgrade our rating as we think forecast risk is on the upside from a shift in holiday demand back to the higher margin Eastern Med”
Thomas Cook shop
The US investment bank also hiked its target price for the FTSE 250-listed firm to 140p from 130p

Morgan Stanley bought some sunshine to Thomas Cook PLC’s (LON:TCG) shares today, upgrading its rating for the mid cap holidays firm to ‘overweight’ from ‘equal-weight’ on hopes for better demand.

The US investment bank also hiked its target price for the FTSE 250 listed firm to 140p from 130p, with the stock changing hands in mid morning trade at 126.9p each, up 1.5%, or 1.9p on Friday’s close.

READ: Thomas Cook to close 50 high street stores after reviewing UK retail network

In a review of the European leisure sector for clients, Morgan Stanley’s analysts said: “We upgrade our rating as we think forecast risk is on the upside from a shift in holiday demand back to the higher margin Eastern Med”.

They also highlighted “strong trading at Condor aided by the carve-up of Air Berlin, UK demand holding up better than expected, solid demand in Continental Europe, strong support from cost savings (with the Expedia deal a game-changer), and the recent bond issue bringing down finance costs.”

READ: Thomas Cook shares fall as UK margins hit by tough competition for Spanish holidays

The analysts upgraded their earnings per share estimates for Thomas Cook by 5%, and think the shares look cheap on a 2019 estimates price/earnings of 9.3 times and a free cashflow yield of 11.0%.

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