Goldman Sachs downgrades Flight Centre to ‘sell’
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The news: Goldman Sachs analysts have downgraded their rating on Flight Centre to ‘sell’ and cut their price target on the stock citing slowing growth and rising competition.
The numbers: Goldman analysts Lisa Deng and James Leigh cut their 12-month target price to $18.30 from $20.10, while downgrading their rating on the travel agency to sell from neutral.
Shares in the company were down 2.2% to $21.18 in early trading on the ASX.
The context: The analysts said latest industry data suggests the global travel recovery has largely played out with early signs of softening growth, while corporate travel is also plateauing with volumes recovering to around 75% of pre-Covid levels.
At the same time, competition in the small and medium enterprises segment has intensified. These trends are likely to weigh on Flight Centre’s margins, prompting an adjustment in forecast earnings.
“Our sell thesis is based on our belief that margin recovery from here is likely to be slower than consensus expects… Overall, we view Flight Centre's valuation as fully reflective of its growth prospects,” the analysts said in a note.
The source: Goldman Sachs
