InterContinental share price hit by UBS downgrade

Written by: Tsveta van Son
March 11, 2020

InterContinental Hotels Group’s (LON:IHG) share price closed in the red yesterday as UBS turned bearish on the Holiday Inn and Crowne Plaza owner. Sharecast quoted the broker as commenting that the group’s current valuation appeared to be ‘at odds with rising headwinds’.

InterContinental’s share price shed 1.71 percent to close at 5,235.00p yesterday, underperforming the broader market rally which saw the benchmark FTSE 100 index gaining 61.69 points to end trading 0.82 percent higher at 7,559.19. The group’s shares have added more than 12 percent to their value over the past year, as compared with about a 0.15-percent gain in the Footsie.

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UBS turns bearish on InterContinental

UBS trimmed its recommendation on InterContinental from ‘neutral’ to ‘sell’ yesterday. Sharecast reports that while the analysts acknowledged that the company was “one of the best of breed hoteliers” and felt ‘no surprise’ that it was so highly rated by the market given the quality of its brands, pipeline, strong execution and management team, they nevertheless highlighted the ‘unattractive risk/reward’ on offer in the stock given the recent expansion in the group’s valuation multiples.

The broker further pointed to slowing revenue per available room trends and a pipeline which looked set to create further RevPAR headwinds as its reasoning to cut growth estimates for InterContinental by three percent per year, which was above the two percent priced in by the market.

Other analysts on Holiday Inn owner

Barclays trimmed its stance on the Crowne Plaza and Holiday Inn owner from ‘equal weight’ to ‘underweight’ last month, while also lowering its target on the InterContinental share price from 4,500p to 4,400p. According to MarketBeat, the blue-chip group currently has a consensus ‘hold’ rating and an average valuation of 5,006.25p.

InterContinental updated investors on its first-quarter performance in May, posting  a small rise in first-quarter revenue as it suffered from weakness in the  Greater China region.