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Intercontinental Hotels Group PLC (LSE:IHG) saw its share price rise on Wednesday following an upgrade from Goldman Sachs, while Whitbread PLC (LSE:WTB) experienced a decline after a downgrade.
Goldman Sachs raised its rating for IHG, the owner of the Crown Plaza chain, from 'neutral' to 'buy.' The investment bank also increased its target price for IHG shares to 9,350p. The analysts at Goldman Sachs highlighted that the current share price presents a valuable entry point for those interested in a high-quality, asset-light hotel franchising platform.
IHG, which owns well-known brands such as Holiday Inn, Six Senses, Kimpton, Voco, and Avid, is projected to achieve a compound annual growth rate of 15.1% in earnings per share (EPS) through to 2028. Additionally, the company is expected to deliver a 7% return to shareholders annually through dividends and share buybacks. According to Goldman Sachs, IHG offers some of the highest returns on capital within their coverage.
The analysts pointed out a significant valuation gap between IHG and its US counterparts. Recent months have seen a de-rating of the London-listed group, with its price-to-earnings (P/E) ratio discount widening to about 17-18% compared to US peers. Goldman Sachs views this discrepancy as unjustified. They believe that IHG’s enhanced long-term EPS growth prospects, improved enterprise platform, and potential for additional revenue streams warrant a narrower valuation gap relative to its key US competitors.
In contrast, Whitbread PLC, which operates the Premier Inn chain, received a downgrade from Goldman Sachs. The firm’s rating was lowered from 'buy' to 'neutral' as part of a broader review of the hotel sector. This downgrade reflects concerns about Whitbread's performance relative to its peers and broader market conditions affecting the hotel industry.
Overall, while IHG is seen as a compelling opportunity with robust growth potential and attractive returns, Whitbread's outlook appears less favorable at present. The contrasting updates from Goldman Sachs underscore the divergent trajectories of these major players in the hotel industry.con
