On Friday, Whitbread PLC (LON:WTB:LN) (OTC: WTBCF) received an updated stock rating from Redburn-Atlantic, moving from Sell to Neutral. The firm set a price target for the company at GBP27.50. This change reflects the analyst's view that the company has experienced a significant recovery post-COVID, achieving its highest return on capital employed (ROCE) in the fiscal year 2024.
The analyst noted that while recent trading for Whitbread has shown some weakness due to the normalization of UK hotel pricing from previously high levels, and despite challenges in restructuring the restaurant portfolio, the severe decline in the company's share price has likely factored in potential future downgrades in estimates. This suggests that the current share price is now closely aligned with Redburn-Atlantic's new price target.
The commentary from Redburn-Atlantic highlighted Whitbread's robust recovery since the pandemic and its record-setting ROCE in the fiscal year 2024. However, the analyst also pointed out that the company's recent performance has been impacted by a return to normal levels in hotel pricing in the UK, along with obstacles faced during the restructuring of its restaurant operations.
The firm believes that the market has already adjusted to these challenges, as indicated by the drop in the share price. This suggests that any further downgrades in estimates that Redburn-Atlantic anticipates are already reflected in the current stock valuation.
Looking ahead, Redburn-Atlantic expects that the latter part of the year could bring improved sentiment towards Whitbread, as the company will be facing easier comparative figures. The shares are currently trading slightly above the firm's price target of 2,750 pence, prompting the upgrade to a Neutral rating.
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