City broker Numis has downgraded FTSE 250-travel provider Thomas Cook Group PLC (LON:TCG) to 'Add' from 'Buy' as recent strong performance in the shares left it within striking distance of the broker's target price.
Following the group’s interim results yesterday, in which it saw its pre-tax losses reduce by £20mln and bookings for its summer period already 59% filled, analysts at Numis said “TCG's material improvement in its NPS [net promoter score] over the last three years (+9 ppts) has yet to be fully reflected in customer demand, given the duration of the holiday booking cycle.”
READ: Thomas Cook’s pre-tax loss narrows as bookings grow ahead of busy season
The broker, which currently holds a target price of 159p on the stock, added: “We derive our FV from a blended SOTP, FCFE yield and EV/IC valuation … using a 35% discount to peers. This yields a FV of 159p and implies an FY19 P/E of 12.0x and FCFE yield of 7.0%. With 14% upside following the recent strong s/px performance, we issue an ADD recommendation.”
In the last month up to last close on 17 May, Thomas Cook’s shares have increased by 14% from 121.8p to 139.1p.
In mid-morning trading Friday, Thomas Cook shares were down 3% at 134.8p.