Canaccord Genuity lowers target price on On The Beach

Canaccord Genuity lowered its target price on packaged holidays business On The Beach from 220.0p to 187.0p following the group's recent trading update.

The Canadian bank stated On The Beach has seen its shares trade sideways for the last 12 months, which it believes could be reflected in the uncertainty around increasing levels of competition, with more airlines going direct-to-consumer, as the company has not seen any additional market share gains in value over the last seven years.

Furthermore, Canaccord reckons some uncertainty remains around the success of the business model moving towards long haul and premium and whether On The Beach can continue to win new customers within the new growth markets without significantly diluting its underlying earnings margin.

"However, the valuation remains very low, trading on a FY25E FCF yield of 13%, while the net cash balance sheet (average net cash £66.0m) gives the group optionality," said Canaccord, which reiterated its 'buy' rating on the stock and updated its FY24-25E estimates, increasing its FY24-25E EBITDA by 15% and 12%.

Reporting by Iain Gilbert at Sharecast.com