Saga share price slumps as JPMorgan trims rating

on Mar 8, 2019
Updated: Oct 21, 2019

Shares in Saga (LON:SAGA) have fallen deep into the red in today’s session as JPMorgan Cazenove lowered its stance on the cruises-to-insurance group for the over-50s. Proactive Investors reports that the analysts said that competitive markets are adding to margin pressures, and questioned the sustainability of the company’s payout to shareholders.

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As of 09:49 GMT, Saga’s share price had given up 9.36 percent to 111.30p, weighing on the FTSE 250 which currently stands 0.72 percent lower at 19,046.58 points. The group’s shares have lost nearly seven percent of their value over the past year, as compared with about a 4.5-percent fall in the mid-cap index.

JPMorgan trims stance

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JPMorgan Cazenove lowered its rating on Saga from ‘neutral’ to ‘underweight’ today, and trimmed its valuation on the shares from 140p to 120p. Proactive Investors quoted the analysts as commenting that in their view, the lifestyle group “faces margin pressure across its broking business, as competitive conditions continue to weigh on industry profitability”.

“Given that Saga is seeking to return to policy growth after many years of declines, this is an unhelpful backdrop, we believe, while travel may also be seeing pressure due to Brexit uncertainty,” the broker pointed out, adding that Saga was “taking on a significant amount of new debt in the next two years to fund its two new cruise ships and, in our view, remaining below 3.0x at the leverage peak looks increasingly challenging”.

JPMorgan concluded that it saw “little scope for a re-rating currently, as any further pressure could raise the question of dividend sustainability”.

Other analysts on Saga

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The four analysts offering 12-month price targets for Saga for the Financial Times have a median target of 165.00p on the shares, with a high estimate of 185.00p and a low estimate of 105.00p. As of March 8, the consensus forecast amongst five polled investment analysts covering the lifestyle group has it that the company will outperform the market. 

As of 10:15 GMT, Friday, 08 March, Saga PLC share price is 111.30p.

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