Stock of the day 17/03/2016 – Thomas Cook Group PLC

Seemingly stuck in a never ending holiday from hell can Thomas Cook halt its decline when it updates investors next Tuesday?

After a rocky 2015 (for a whole host of different reasons, both in and out of the company’s control) saw Thomas Cook close out the year at £1.22, a sharp drop from the £1.61 post-election highs seen in May, things got off to a fairly decent start in 2016, the stock avoiding the immediate disaster that hit the markets, instead touching £1.25 by the middle of January.

Yet the holiday maker could only hold out for so long, and the rest of January saw the stock more than make up for whatever ground it hadn’t lost in the first few weeks of the year, plunging to £1.05 by the end of the month. That fall was exacerbated by the fact that the company (alongside First Choice and Thomson) cancelled of all of British bookings to Tunisia due to ongoing security fears. The sell-off only intensified as February got underway, Thomas Cook eventually tumbling to a near-3 year low of 88p as the middle of the month approached.


(Source: IT-Finance.com 17/03/2016)

Things did improvement, however, after Thomas Cook revealed its first quarter figures; with revenues rising 1% to £1.4 billion, the company stated it had compensated for the decrease in travel to Tunisia and France following the tragedies that plagued both countries in 2015 by seeing an increase in trips to the likes of Spain, Greece, Bulgaria and Cuba. This helped the holiday maker’s underlying operating loss ease by 11% to £49 million, although pre-tax losses did widen by £1 million to £116 million. All in all it was a solid update from a company finding itself in a tough, uncertain sector, and after a brief wobble following the statement it managed to right itself somewhat as February continued, closing the month back above the £1 mark.

However the stock began to slide at the start of March, continually threatening to fall below £1; that threat became a reality on the 15th, the company plunging over 6% as Citigroup gave the stock a ‘Sell’ rating, stating that customers would opt for a ‘staycation’ this summer due to the dual impact of a weaker pound and Euro 2016. Thomas Cook now sits at a current trading price of 93p (IT-Finance.com, 17/03/2016).

The company has a hell of a job ahead of it if it is to sufficiently impress investors next week, especially after that Citigroup sting. It is stuck in a sector that is at the mercy of global security concerns, whilst also having the issue of a Brexit (and the argument that leaving the EU would cause travel prices to go up, something that may impact sales) looming large for the next few months at the very least.

Thomas Cook Group PLC has a consensus rating of ‘Hold’ with an average target price of £1.31.