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Investing.com - BNP Paribas (OTC:BNPQY) Exane downgraded SSP Group Plc. (LON:SSPG) (OTC:SSPPF) from Neutral to Underperform on Thursday, while significantly reducing its price target to GBP1.60 from GBP2.60. The company, currently valued at $1.76 billion, has shown mixed performance with revenue growth of 11.5% in the last twelve months. According to InvestingPro analysis, the stock currently appears undervalued based on its Fair Value estimates.
The downgrade reflects concerns that SSP Group continues to show performance that merely matches local traffic benchmarks in like-for-like terms, without demonstrating superior growth. InvestingPro data reveals the company’s volatile stock performance, with a beta of 1.76, though analysts expect net income growth this year. Get access to 5+ additional exclusive ProTips and comprehensive financial metrics with InvestingPro.
BNP Paribas Exane noted that while SSP’s ambitious plans for market share gains could lead to total organic growth ahead of competitor Avolta, the required capital expenditure is likely to cap cash flows.
The research firm identified the convergence between retail and food & beverage sectors as a new medium-term risk for SSP Group, which operates as a food and beverage pure play without offering hybrid concepts.
The substantial price target reduction from GBP2.60 to GBP1.60 reflects BNP Paribas Exane’s assessment of stronger pre-IFRS margins being offset by materially higher capital expenditure and minorities.
In other recent news, Citi analysts have increased the price target for SSP Group to GBP3.20 from GBP3.10, while maintaining a Buy rating on the stock. The analysts cited SSP Group’s capacity for organic growth, projecting increases of 9%, 6%, and 6% for the fiscal years 2025, 2026, and 2027, respectively. Despite challenges, such as a slowdown in North American air travel growth, SSP Group is strategically shifting focus from inorganic growth and new contract acquisitions to enhancing returns. Citi analysts are monitoring trends in U.S. air travel growth for potential signs of further decline or recovery. They emphasize that SSP Group’s diverse growth strategies position the company to manage industry fluctuations effectively. These developments reflect SSP Group’s adaptive strategies amid a period of economic uncertainty.
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