Whitbread plc (LON:WTB) was the top blue chip faller this morning as Goldman Sachs downgraded its rating for the leisure firm in a review of the European hotels sector.
The US bank cut its stance on Whitbread to ‘sell’ from ‘neutral’ after reducing its target price for the stock to 3,900p from 4,000p, implying around 9% downside on last night’s closing price.
in early morning trading, Whitbread shares were 1.6%, or 70p lower at 4,228p.
In a note to clients, Goldman’s analysts pointed out that 5.7bn hotel room nights were booked in 2015 and they believe demand should keep rising.
However, they said they expect Whitbread - which owns the budget Premier Inn chain - to lag sector growth “due to higher capital intensity and macro headwinds in the UK.”
The analysts said they expect Whitbread to deliver like-for-like sales growth of 1.7% in full-year 2018, versus around 4% growth over the past decade, which they think is not reflected in the group’s valuation.
Further, they added, they expect Whitbread’s earnings per share growth to be slower than its hotel peers, while the company’s shares trade in line with the sector, which the analysts said they “don’t think is appropriate.”