Traditional travel agencies have taken a big hit from the boom of online travel tools, and Thomas Cook is fighting for survival as the company undergoes a strategic review.
Thomas Cook Group Plc (TCG), the U.K. tour operator saved by an emergency loan in 2011, rose to the highest price in more than a year, topping the 12-month targets of all analysts surveyed by Bloomberg, as it started promotions for 2013 holidays.
The stock surged as much as 8.3 percent and was up 7.2 percent at 48.25 pence as of 12:21 p.m. in London, where the company is based. The average 12-month target of 13 analysts who share their research with Bloomberg is 26.46 pence, implying that the shares will decline 45 percent.
Thomas Cook is advertising a 10 percent-off sale to encourage U.K. travelers to book 2013 vacations early, and is promoting “fly and cruise” holidays such as a trip to Barcelona followed by a Mediterranean journey on the “Liberty of the Seas” vessel.
Thomas Cook shares have more than doubled since late November as analysts such as James Hollins at Investec said Chief Executive Officer Harriet Green will probably cut costs and turn around the business. Green joined in July and is scheduled to present the outcome of a strategic review in the new year.
While full-year revenue missed analysts’ estimates, Green said Nov. 28 that the results “mask the material improvement that we made in the fourth quarter.”
Thomas Cook “seems to be on the right track and the operating momentum should improve in 2013,” analysts at Natixis including Geoffrey d’Halluin said in a note to investors after the earnings report. Net debt has been reduced but “remains high,” according to Natixis, which has a neutral recommendation on the stock.
Analysts’ views about the travel operator’s prospects are widely divergent. Richard Stuber at Nomura and Ed Birkin at Barclays are among those who say the stock will decline precipitously, with targets of 6 pence and 8 pence, respectively.
Thomas Cook shares have more than tripled this year, while competitor TUI Travel Plc has gained about 70 percent.
Editors: Robert Valpuesta and Tom Lavell. To contact the reporter on this story: David Risser in London at email@example.com. To contact the editor responsible for this story: Heather Harris at firstname.lastname@example.org