Goldman Sachs made a shift in its stance on two London-listed hotel stocks in a note this week, upgrading InterContinental Hotels Group (LON: IHG) while downgrading Premier Inn owner Whitbread (LON: WTB).
The investment bank has raised its rating for IHG from Neutral to Buy, setting a price target of 9,350p, an increase from the previous target of 8,250p a share.
Goldman's analysts argue that IHG's enhanced long-term earnings growth prospects, improved enterprise platform, and potential for ancillary revenue streams justify a narrower valuation discount compared to its key US peers.
In addition, the investment bank says that with IHG shares having de-rated compared to its US peers in the last six months, the valuation gap has re-widened, creating an attractive entry point into a high-quality asset-light hotel franchising platform.
In contrast, Whitbread was downgraded from Buy to Neutral.
Goldman Sachs set a price target of 3,500p for the company. In its note to clients, the bank cited a shift in its relative preference for European hotels, favoring IHG over Whitbread.
Even though Goldman Sachs still sees upside for Whitbread shares, it acknowledged that the company's valuation is currently below the coverage average.
IHG shares have gained around 0.9% on Thursday, adding to their recent climb which has seen the stock gain 6.7% in the last month. Whitbread is up 0.5% on Wednesday after a more than 10% gain in the last month.
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