Saga share price slides lower as Peel Hunt trims valuation

on Apr 25, 2019

Shares in Saga (LON:SAGA) have fallen deep into the red in today’s session as Peel Hunt lowered its valuation  on the lifestyle group. The move comes after JPMorgan Cazenove lifted its rating on the cruises-to-insurance group for the over-50s yesterday.

As of 13:16 BST, the Saga share price had given up 3.86 percent to 58.55p. The shares are underperforming the mid-cap FTSE 250 index which currently stands 0.30 percent lower at 19,934.21 points.

Peel Hunt trims Saga share price

Peel Hunt, which is bullish on the mid-cap group with a ‘buy’ rating, trimmed its valuation on the shares from 180p to 110p yesterday. Sharecast quoted the broker as commenting that the cruises-to-insurance group for the over-50s  was now getting its priorities right after losing its way and resetting its strategy, refocusing on the insurance broking business and returning to its core direct distribution strategy.

The analysts, however, also reckon that this was happening at a high cost, with the broker’s January 2020/21/22 adjusted earnings per share estimates declining by 40 percent/50 percent/47 percent to 7.7p/7.6/9.3p, respectively. Peel Hunt further pointed out that Saga had lowered its insurance new business and renewal margins, was investing in new value-add products and was rebooting its direct distribution strategy, increasing customer acquisition costs.

The analysts also noted that Saga’s business model for the 50+ demographic remained attractive, but that execution had disappointed.

“The stock remains a buy as we patiently believe Saga can be revitalised and finally complete its transition to an affinity broking group, for which the business is uniquely positioned,” Peel Hunt concluded, as quoted by Sharecast.

Analyst ratings update

According to MarketBeat, Saga currently has a consensus ‘hold’ rating and an average price target of 116.40p. JPMorgan lifted its stance on the company yesterday, arguing that the market was now aware of the challenges faced by the company.