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Clouds on the horizon for Thomas Cook, say financial experts
Shareholders in Thomas Cook have been advised to sell their shares by leading financial journalists.
The Telegraph’s financial column Questor, which gives daily advice on the best time to buy, sell or hold shares, believes there are ‘clouds on the horizon’ for the travel giant.
The warning came after Thomas Cook released its pre-close trading statement yesterday.
"Yesterday reported a steady picture of trading through the summer holiday season and an encouraging outlook for the winter ahead," said the column.
"However, Questor has serious concerns that competition might be about to get a lot more difficult in the travel sector and that leaves the shares looking increasingly exposed."
It said it was concerned because falling average prices at Thomas Cook are at odds with the rest of the sector where pricing is strong, particularly for the low-cost airlines.
Questor believes ticket prices could come under further pressure this winter as airlines take advantage of lower fuel prices.
"Thomas Cook could find it difficult to fight back in this environment as its balance sheet is still unwieldy," it said.
"A major capital reorganisation has taken place and net debts are expected to fall to about £300m at the end of September, down from £326m last year. However, that is high for a company with negative net assets and compared to rivals who have net cash on the balance sheet.
"The shares may look good value, trading on 10 times forecast earnings. But that rating is dependent on a 30% recovery in profits during the next 12 months, and Questor thinks that will be incredibly hard to achieve, given the current environment."
Bev
Editor in chief Bev Fearis has been a travel journalist for 25 years. She started her career at Travel Weekly, where she became deputy news editor, before joining Business Traveller as deputy editor and launching the magazine’s website. She has also written travel features, news and expert comment for the Guardian, Observer, Times, Telegraph, Boundless and other consumer titles and was named one of the top 50 UK travel journalists by the Press Gazette.
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