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Wake up and smell the coffee: Citigroup chops rating for Whitbread to 'sell' from 'buy'

The US bank’s analysts said its Research Innovation Lab had “debunked the coffee growth myth” after assessing the performances of Costa, Caffe Nero, Starbucks and Greggs

Costa coffee cup
Based on the Lab’s findings, Citi reckons there is only four to five years structural growth left in the market for mochas and macchiatos

The London arm of US banking giant Citigroup was responsible for wiping almost £160mln from the value of Whitbread plc (LON:WTB) today with a downgrade to its rating in the owner of Premier Inn and Costa Coffee.

The stock fell as much as 3% early on as Citi moved straight to ‘sell’ from ‘buy’ on the stock.

READ: Goldman Sachs gives Whitbread a lift, upgrading its rating to ‘neutral’

Its valuation of 3,200p is around 690p lower than the current Whitbread price.

In a note to clients, the US bank’s analysts said its Research Innovation Lab had “debunked the coffee growth myth” after assessing the performances of Costa, Caffe Nero, Starbucks and Greggs.

Based on the Lab’s findings, Citi reckons there is only four to five years structural growth left in the market for mochas and macchiatos.

Meanwhile, the outlook for Premier Inns is even more grim with revenue per available room likely to grow 0.5%-2% in the period ended 2021, leading to “margin compression”.

At 10.00am, Whitbread shares were down 2.3%, or 88p at 3,688p.

Quick facts: Whitbread plc

Price: 4201 GBX

LSE:WTB
Market: LSE
Market Cap: £5.62 billion
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