Citigroup took some of the recent fizz out of JD Wetherspoon PLC (LON:JDW) shares today, downgrading its rating to ‘neutral’ from ‘buy’ on valuation grounds and amid concerns over the UK consumer.
In a note to clients, the US bank’s analysts said: “Since early July 2016 JDW’s share price has increased 50% and the shares are now trading close to our 1,030p target price.”
In early morning trading, JD Wetherspoon shares on the FTSE 250 index were down 0.8%, or 8p at 1,006p.
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They added: “Amid growing concern for the outlook of UK consumers we take the opportunity to downgrade our recommendation”.
The analysts pointed out: “Following the very strong margin and earnings performance in the last year we expect a weaker consumer, cost pressures and higher interest costs to cause earnings to contract by 5% in the next 2 years.”
They added: “Although the group’s cash flow remains strong the pre growth capex FCF yield of c7% no longer stands out among peers.”
The analysts said their preferred Pub/Restaurant play is Greene King PLC (LON:GNK), shares in which were 0.3%, or 2.5p higher at 736.0p.