Shares in Saga (LON:SAGA) have slipped marginally into the red, underperforming the broader market, as RBC Capital Markets lowered its stance on the cruises-to-insurance group for the over-50s. The move followed the mid-cap company’s profit warning earlier this month.
As of 12:54 GMT, Saga’s share price had lost 0.16 percent to 125.20p, underperforming the FTSE 250 which has climbed into positive territory and currently stands 0.52 percent higher at 20,360.23 points. The group’s shares have given up more than 34 percent of their value over the past year, as compared with a more than 14-percent gain in the mid-cap index.
RBC lowers stance on Saga
RBC Capital Markets lowered its stance on Saga from ‘outperform’ to ‘sector perform’ today, slashing its price target on the shares from 250p to 135p, noting that it was now less positive on the lifestyle group’s motor broking business.
“Our previous buy case was centred on footprint expansion and margin improvement in the broking segment, which we now do not expect Saga to achieve in the near term,” the analysts explained, as quoted by WebFG News. “Further, the pricing structure of the broking business is less attractive than we previously thought.”
The analysts further explained that the lifestyle group’s retail business operates on a spread basis so its revenue was affected by pricing from its underwriting panel, and external competitive pricing pressures, while its peers’ revenue “is more resilient as it is based on a percentage of premiums or fixed fee, so there is less need to sacrifice revenue for volume”.
The analysts nevertheless noted that the longer-term opportunity for Saga was positive as the UK has an ageing demographic.
Other analysts on Saga
The nine analysts offering 12-month price targets for Saga for the Financial Times have a median target of 180.00p on the shares, with a high estimate of 250.00p and a low estimate of 135.00p. As of December 16, the consensus forecast amongst nine polled investment analysts covering the blue-chip group has it that the company will outperform the market.