Goldman Sachs downgrades SSP to ‘sell’, prefers WH Smith

Goldman Sachs downgraded SSP on Monday to ‘sell’ from ‘neutral’ "on a relative basis" as it took a look at European travel concessions.

The bank slashed its price target on SSP to 160p from 255p. It said that while SSP has an attractive long-term growth opportunity, it expects the shares to continue to underperform within its coverage on a 12-month investment horizon.

It sees further downside risk to earnings per share consensus estimates for FY25/26 and relatively limited free cash flow generation over the next three years.

"This contributes to our relative preference for WH Smith over SSP within our European travel concessions coverage," it said.

Goldman said WH Smith offers exposure to similar structural growth themes to SSP - e.g. global passenger growth tailwinds, significant potential for new contract wins in key markets like North America - with similar net contract win growth for its travel business on the bank’s forecasts - but at a more attractive valuation with stronger cash generation and a more compelling catalyst path.

This includes scope for earnings upside and a potential inflection of US LFL trends in the coming quarters.

"Furthermore, when screening against our broader travel & leisure coverage, we note that SSP screens among the lowest on fundamentals, while WH Smith screens broadly in-line with the sector median," GS said.

Goldman rates WH Smith at ‘buy’ with a 1,540p price target.

At 1000 BST, SSP shares were down 3.1% at 163.40p.