While the news flow from Merlin Entertainments PLC (LON:MERL) may not have been the most positive over the past year or so, the underlying business has actually been performing pretty well.
Indeed, the share price has rallied more than 16% since it plummeted following the incident on The Smiler rollercoaster at its Alton Towers theme park last June.
At one point over this summer, that figure was closer to 30%, and Peel Hunt thinks the slide away from these recent highs represents a good buying opportunity.
“While Merlin’s share price has been on something of a rollercoaster ride, we note that the overall trend has been upwards,” said Peel Hunt analyst Ivor Jones.
“Now, having slid back from recent peaks, we believe it has reached an attractive point at which to get on board.”
Jones expects the attractions group to turn in another decent performance in 2017, warning investors that if they wait for proof of strong trading, they’ll probably miss the boat.
The analyst also thinks that Merlin – which also owns attractions such as Legoland, Madame Tussauds and the London Eye – often goes under the radar because of the lack of any competitors or similar businesses in the UK.
“We believe Merlin gets overlooked by investors as it doesn’t really have any comparable companies to highlight the attraction of Attractions,” he explains.
With the price at one of its “periodic low points”, Jones has the stock as a buy, setting a target price of 510p (currently around the 430p mark).
“We believe there is potential for upside surprise from; a stronger than expected recovery at Alton Towers, the announcement of a New York Legoland, increasingly efficient use of technology and, possibly, reduced capital intensity in some areas of the business and adding city centre hotels.”