Berenberg has given a knock to Merlin Entertainments PLC (LON:MERL), downgrading its rating for the theme parks group to ‘sell’ from ‘hold’, with the stock “priced for perfection”.
The German broker also reduced its target price for the FTSE 250-listed stock to 315p from 340p, with the shares currently trading at 348.70p, down 5.5% on Wednesday’s close.
READ: Merlin shares rise as theme park growth offsets LEGOLAND slowdown
In a note to clients, Berenberg analysts said they think Merlin’s 2019 adjusted earnings per share (EPS) could fall by as much as 20% year-on-year before IFRS 16 changes.
They said their estimates for the owner of Legoland, Alton Towers and Madame Tussauds remain on a pre-IFRS 16 basis, and are now around 6%, 11% and 16% below consensus for 2019, 2020 and 2021 respectively..
The analysts said they “struggle to see the company achieving EBIT growth in any division this year, despite its cost-savings plan and continued investment in new sites and hotels.”
They concluded: “Given the earnings risk, we think the shares are mispriced at 19x 2019E P/E, and downgrade our rating to Sell.”