Canaccord Genuity hikes price target for On the Beach

Canaccord highlighted that On The Beach's "strong update" last week indicated that trading at the start of the year had been "robust", exceeding expectations, with total transaction value up 68% year-on-year and revenue growth likely to be similar.

"With consensus estimates for FY23 expecting revenue growth of circa 10%, we believe FY estimates are well underpinned; however, it remains early in the booking window," said the analysts.

In the Canadian bank's view, On the Beach's move to premium product was starting to pay dividends, yet it also noted that there remains "much more to go now" the group has "a significantly greater" total addressable market and "arguably less competition".

But that aside, Canaccord said the move to premium should help re-rate the stock given higher levels of visibility.

"On The Beach trades on an FY23E PER of just 14.2x and EV/EBITDA ratio of just 5.6x, with an FCF yield of 7%," said Canaccord, which reiterated its 'buy' rating on OTB's shares.

Reporting by Iain Gilbert at Sharecast.com