On the Beach Group (LSE:OTB) shares are downgraded to 'Hold' at UK stockbroker Shore Capital, which reckons the holidays company has “a lot to do”, as it pushes into new markets.
The broker highlighted pressure on revenue margins and cut its FY26F profit expectations after a period of rapid strategic expansion.
Shore Capital said OTB’s move into Ireland, city breaks, long-haul and premium, alongside the decision to wind down B2B, had already stretched the group, meanwhile, a new launch of a cruise offering raises further concerns about focus, it added.
“We are concerned that OTB might be spreading its focus too thinly and moving before proof of concept is fully confirmed," Shore Cap said in the note.
The broker noted that revenue margins in the B2C division have fallen from about 13% in FY19 to around 10% expected in FY25F. Its FY26F PBT forecast has been reduced by 6% to £41.70 million.
Competitive pressure from low-cost carriers and package operators remains a key headwind, while consumer discretionary spending is still weak.
Shore Capital cut its fair value estimate to 230p and said execution risk around new ventures and a difficult trading backdrop justified the new rating.