Exit Premier Inn owner Whitbread for now
Whitbread (WTB) £20.70
Loss to date: -6.8%
Original entry point: Buy at £22.20, 6 August 2020
Premier Inn owner Whitbread (WTB) remains an interesting investment story long term but it’s time to cut losses for now as the outlook for the business becomes increasingly cloudy.
As the UK approaches winter with a second wave of coronavirus cases, the stronger lockdown measures put in place have led Whitbread to cut 6,000 jobs as it expects market demand to remain low over the medium-term.
Business travellers for example have always been a significant market for Premier Inn, particularly in September and October, and this is an area which looks like it won’t recover for a long time.
It is a risk we flagged when we tipped the shares last month, but the situation since then has changed and looks more serious than previously thought.
We think now is the time to sell Whitbread and not risk a big loss, with investor sentiment likely to weigh on the stock significantly over the coming months.
But it is a stock still worth keeping an eye on, as the underlying investment case remains relatively intact. Rival Travelodge continues to struggle, which will benefit Premier Inn greatly when demand recovers, while the company has also been trading above the market in recent months and, despite the pandemic, is still looking to grow in Germany.
SHARES SAYS: The underlying story remains mostly intact, but investors could be in for losses over the coming months. Time to sell and revisit later.