Whitbread boosted by Credit Suisse upgrade

Whitbread got a boost on Tuesday as Credit Suisse upgraded the stock to ‘outperform’ from ‘neutral’ and lifted the price target to 4,550p from 4,030p as it took a look at European hotels.

The bank said it sees a return to positive hotel trading momentum and that the company’s £150m cost-saving plan mitigates the risk from National Living Wage increases.

In addition, CS pointed out that the stock’s valuation has rarely been this cheap.

“Although the outlook for the UK remains uncertain, we believe the benefits of sterling weakness could be meaningful. This is having a positive impact on UK lead indicators already and hence our revenue per available room model is the most positive since late 2014.

“We would also expect a benefit from increased net inbound travel via improved demand for London and more domestic demand across the Premier Inn estate.”

As a result, CS upped its February 2018 RevPAR estimate to 3% from 1%.

The bank said the next catalyst will be the company’s third-quarter trading update on 26 January, adding that key risks to its ‘outperform’ rating centre on the UK consumer outlook, linked to both potential Brexit negotiation uncertainty and higher inflation impacting real wages.

At 0852 GMT, Whitbread shares were up 2.7% to 3,968p.

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