Financial Trading Blog
Stock of the day 23/02/2016 – Merlin Entertainments PLC
September saw Merlin post its first report since the horrific crash at Alton Towers back in June, with third quarter revenue rising a meagre 0.3% as memories of the accident and a wet summer dampened customers’ appetite for a trip to one of the company’s many attractions. Understandably it was the Merlin’s theme park sales that saw the biggest drop, falling 11.4% in the aftermath of the tragedy. That expected, if still unwelcome, slump helped keep the stock on its already established downward path, Merlin reaching a 10 month low of £3.66 by the end of September.
(Source: IT-Finance.com 23/02/2016)
As the markets began to recover from the widespread lows, however, Merlin began to rise, trading back above the £4 mark as November came to a close. An update at the start of December lifted the stock further, with Merlin stating that it expected its full year figures to be in line with its previous guidance despite the fall in Alton Towers’ visitors. By the end of 2015 Merlin had managed to climb all the way back to the £4.50s, its highest point since the initial few days of trading following the disaster last June.
However those recent highs were soon wiped out in the early turmoil of 2016, an accelerated decline in the middle of January leaving Merlin just above £4 as it headed into February. The resumption of the market’s sharp decline as February got underway then took another 20p off its price, causing Merlin to hit a 4-ish month low of £3.78 in the first week of the month. Yet just as it suffered from the macro-malaise of the year’s first 6 weeks Merlin has benefited from the recent rebound, lifting to a current trading price of £4.43 (IT-Finance.com, 23/02/2016).
In terms of its full year report on Thursday analysts are largely expecting Merlin’s pre-tax profit to come in at an effectively unchanged £249 million. That leaves plenty of room for surprise, a slight movement either side of that figure likely to dictate Merlin’s performance post-results, especially with investors’ ostensibly reduced expectations post-Alton Towers accident.
Merlin Entertainments PLC has a consensus rating of ‘Buy’ with an average target price of £4.58.
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