Merlin share price: Numis lowers rating to ‘hold’

on Nov 19, 2013
Updated: Oct 21, 2019
Listen, Tuesday, November 19: Merlin Entertainments (LON:MERL), which only debuted on the London Stock Exchange last week, has already suffered a broker downgrade after its share price hit a post-IPO high of 355p on Friday, 12.7 percent higher than the float price of 315p. Yesterday, analysts at Numis Securities lowered their recommendation for Merlin shares to ‘hold’ from ‘buy’, maintaining their price target at 360p. Merlin’s share price traded mainly flat today at around 345p, 2.8 percent lower than Friday’s peak, but still 9.5 percent above the IPO price.

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According to a note by analyst Ivor Jones at Numis Securities, trading interest in Merlin shares may subside in the absence of any news from the company. “As a result, we believe, shareholders will be considering whether to take profits, while they can, or to buckle-up and settle in for what could turn out to be a long period of coasting.” However, while analysts see few triggers for the shares in the short term, they expect “a number of promising catalysts which could drive an acceleration of revenue trends” in the medium term. The next notable trading update from Merlin may not be until next autumn, when the company will report results from the peak summer season.

Trade these shares now through Hargreaves Lansdown from £5.95 per deal.
**Credit Suisse initiates coverage with a ‘neutral’ rating**
On Friday, Credit Suisse issued a ‘neutral’ rating on Merlin shares, setting a 12-month target price of 352p. The Swiss brokerage considers Merlin is offering a quality growth strategy with a self-funded five-year EBITDA CAGR (compound annual growth rate) of 8.3%. However, it has struggled to identify material earnings or valuation upside potential for the stock. Credit Suisse has expressed a “clear sector preference” for Whitbread (LON:WTB), Britain’s biggest hotel and coffee shop operator, which it rates as ‘outperform’.

**‘Buy’ recommendation from Beaufort Securities**

Merlin Entertainments is not yet widely covered by analysts, however opinions differ significantly. Beaufort Securities, reiterated its ‘buy’ recommendation last Monday, valuing the stock at 380p. It noted that Merlin could be included in Britain’s benchmark FTSE 100 index, when it is reviewed next month, which could trigger significant demand for the company’s shares from index funds. Moreover, the broker expects Merlin to declare its first dividend for 2014, suggesting a yield of around 2.3 percent.

Merlin Entertainments, which owns Madame Tussauds, the London Eye and Legoland, is the biggest visitor attraction operator in Europe and the second largest in the world after Disney. It operates 99 attractions in 22 countries across four continents and welcomed more than 54 million guests last year. The company aims to open six to seven new attractions each year, focusing on the fast growing Asian markets to support future growth and profitability.
**As of 13:11 UTC buy Merlin shares at 345.50p.**
**As of 13:11 UTC sell Merlin shares at 345.00p.**
Trade these shares now through Hargreaves Lansdown from £5.95 per deal.
Prices can go up and down meaning you can get back less than you invest. This is not advice. Dealing services provided by Hargreaves Lansdown.
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