Shares in Intercontinental Hotels Group PLC (LON:IHG) were lying low on Monday after the Holiday Inn-owner was downgraded to ‘underweight’ by analysts at Morgan Stanley, who also chopped their price target for the stock.
Recent data has led the US investment bank to harbour concerns over the demand from corporate America, which accounts for around 70% of demand for hotels across the pond.
US manufacturing data disappointed last week, while Morgan Stanley also notes that CEO expectations have “deteriorated significantly” recently. A survey of corporate travel managers has shown that they expect US room rate growth and volume growth to decelerate this year.
READ: IHG weak as Q3 RevPAR disappoints
“We estimate that every 1% RevPAR (revenue per available room) growth is worth c.US$13mln of EBIT,” read a note to clients on Monday.
“We trim our 2019 RevPAR assumption from 1.3% to 1.0%, and 2020 from 1.0% to 0.6%, leading to a 2% EPS (earnings per share) downgrade in 2020.”
The note adds that IHG’s valuation is not as attractive as some of its peers, which have also seen their shares fall in recent months.
“While we like IHG's business model, its risk-reward skew is less attractive than other stocks in our coverage such as Accor and Whitbread, and we downgrade the rating to ‘underweight’.”
The news sent IHG shares down another 2.5% to 4,105p. Over the past three months, the stock has lost 15% of its value.
SSP upgraded, ‘Spoons downgraded
There was some better news for SSP Group PLC (LON:SSGP), the operator of various food and drink outlets such as Starbucks and Burger King at airports and railway stations.
Morgan Stanley upgraded the FTSE 250 group to ‘neutral’ from ‘underweight’, saying: “We think this is a well-run business operating in a structural growth industry, and following the shares' significant derating…we neutralise our view.”
As for value pub chain JD Wetherspoon PLC (LON:JDW), that was downgraded to ‘underweight’ amid concerns over its ability to repeat last year’s strong like-for-like sales growth, as well as the impact of rising costs.
SSP shares rose 1.8% to 671.1p, while ‘Spoons was also up 1.1% to 1,129p.