On the Beach Group (LSE:OTB) has won a vote of confidence from Shore Capital, which upgraded the online travel retailer to 'buy' after its share price fell almost 50% over the past year.
Analyst Katie Cousins argued that this decline has done enough to take account of recent profit warnings and weakness in the travel market.
Shore Cap's target price of 210p implies almost 40% upside from current levels.
On the Beach has endured a difficult year, with the shares down more than 30% since January after geopolitical tensions in the Middle East disrupted demand, encouraged later booking patterns and squeezed profitability.
The company last month cut full-year profit guidance to £18-25 million from previous expectations of about £39-43 million.
Despite those pressures, Cousins said booking volumes have remained resilient, up 7% in the first half and had recovered to 9% growth at the start of the second half, while city break volumes jumped 116% and Ireland volumes rose 74%.
The analyst also highlighted growth in the company's app, which now accounts for 38% of bookings, up from 30% a year earlier.
Monthly active users increased 29%, helping drive repeat bookings and lower customer acquisition costs. On the Beach has also launched its app within ChatGPT and plans further AI integrations this year.
The group's long-term growth opportunities were being overlooked by investors at current valuation levels, Cousins said.
"With the share price down over 30% year-to-date and an EV/EBITDA of just 5.5x, we see the risk as more than priced in, along with a lack of value for the key growth divisions' progress," the analyst concluded.
