Peel Hunt Limited, a leading UK-based investment bank and brokerage firm, has reiterated its “Buy” recommendation for Hostelworld Group, a leading online booking platform for hostels and budget hotels. The recommendation comes after the company’s positive Q4 2020 trading update, which showed a strong bounce-back for the business following the disruptions caused by the COVID-19 pandemic.
Hostelworld reported a revenue of €14.1 million for Q4 2020, a decrease of 45.5% compared to the same period in 2019. However, this figure represents a significant improvement from the previous quarter, which saw a revenue decline of 90.9%. The company also reported an adjusted EBITDA loss of €1.0 million for the quarter, which is better than the company’s guidance of a loss of €2.0 million.
Peel Hunt Limited highlights that the performance of Hostelworld in Q4 2020 is a positive sign for the company, as it suggests that demand for hostel and budget hotel accommodation is starting to recover after the pandemic-related travel restrictions. The company’s strategy of focusing on domestic travel and providing flexible booking terms has also been effective, as it has helped to attract customers who are hesitant to commit to travel plans due to the uncertainty of the situation.
The investment bank also notes that Hostelworld has a strong balance sheet, with cash and cash equivalents of €27.7 million at the end of 2020. This provides the company with the flexibility to navigate through the ongoing challenges posed by the pandemic, and to capitalise on growth opportunities as they arise.
Peel Hunt Limited has set a target price of 150p per share for Hostelworld, which represents a potential upside of 30% from the current share price of 115.2p. The firm believes that Hostelworld’s strong brand name, dominant market position, and long-term growth potential make it an attractive investment opportunity, particularly as the global travel industry starts to recover from the pandemic.
Hostelworld CEO Gary Morrison also expressed optimism about the company’s future prospects, stating that “we are encouraged by early signs of recovery in our business, particularly for domestic travel, and we are confident that we have the right strategy in place to capitalise on the significant growth opportunities in our market.”
Overall, Hostelworld’s positive Q4 2020 trading update, combined with its strong balance sheet and long-term growth potential, has reaffirmed the investment community’s confidence in the company’s ability to weather the challenges of the pandemic and emerge as a leader in the budget travel market.