Whitbread hit by Goldman Sachs downgrade

Premier Inn and Costa owner Whitbread was under the cosh on Friday after Goldman Sachs downgraded the stock to ‘sell’ from ‘neutral’ and cut the price target to 3,900p from 4,000p.

Goldman said it sees the company lagging the broader UK hotel industry with only around 1% revenue per available room expected this year versus the UK year-to-date average of 7%, adding that the valuation fails to reflect this.

“While we usually see a lag between FX weakness and tourist volume pick-ups, we think Whitbread is unlikely to benefit from the trend due to its largely regional business exposure."

The bank said it already sees Premier Inn delivering weaker growth versus UK RevPAR YTD and reckons like-for-like sales growth at Costa will be under pressure from still weak footfall trends and a more uncertain consumer outlook in the UK.

GS noted that over the past six months, the stock is up 25.6%, outperforming the FTSE 100 by 14.2 percentage points on expectations of growth benefits from sterling weakness which it believes is an overestimate.

At 0855 BST, the shares were down 1.7% to 4,224p.