Intercontinental Hotels Group PLC (LON:IHG) shot up on Friday after receiving a double upgrade to ‘overweight’ from ‘underweight’ by Barclays in a sector review as it's analysts expect a “material” share price recovery by the FTSE 100-listed stock.
Overall, the bank's analysts have a ‘negative’ view on the wider European hotel industry, which they think is vulnerable to another setback.
READ: Intercontinental Hotels upgraded to ‘buy’ as Deutsche Bank predicts fast recovery for hotels once pandemic ‘stabilises’
Although 2021 is expected to see a recovery, revenue per available room could still be 15-30% below last year’s levels, the analysts said.
However, they think an opportunity lies in the longer term for IHG, with the Holiday Inn owner standing out as the top pick in the sector, although they slashed its price target to 3,800p from 4,200p.
“We see IHG having the lowest operating leverage by far among European peers and hence see comparative resilience in earnings in 2021,” the analysts said.
“While we see near-term risks for the sector as the market digests what we expect to be a slow recovery over the next 12 months, we see long-term value in IHG which we consider to be the highest quality name in the sector,” they added.
IHG shares jumped 9% higher to 3,490p on Friday afternoon.
Whitbread downgraded
Blue-chip peer Whitbread (LON:WTB) also saw its shares rise, up 5.7% to 2,722p although the Barclays' analysts cut its rating and target price in the same sector review.
The analysts moved Whitbread to 'equal-weight' from 'overnight' nd more than halved their target to 2,500p from 5,050p.
They said the current valuations of Whitbread - and French peer Accor which they also downgraded - look less attractive in light of the high operating leverage at both.