Meliá Over-Optimism After The Vaccine Boom Invites Caution




Meliá appreciates 60% in just two weeks but discounts an overly optimistic scenario

When Pifzer presented the effectiveness data for its coronavirus vaccine on November 9 , Meliá shares jumped 37% at a time. To date, the rebound is 62 percent. If there is a sector and a value that celebrates it, it is tourism and Meliá .

Of course, it is still too early to claim victory, even as the news raised investors’ appetite for risk. Counting on this rebound, Meliá shares still lose 32% in the annual balance.

Clearly the news is positive, but as Deutsche Bank analysts explain , it is still too early to make a lot of guesses about how the sector will recover. In fact, they are not even having this possible recovery in their forecasts.

What does it take for the sector to recover.It is necessary first that the restrictions imposed by governments to contain contagions are completely relaxed. In addition, travelers need to lose their fear of contracting the virus, they explain at Deutsche Bank.

This will happen when new cases of Covid-19 are under control and when there is a significant percentage of the vaccinated population. At the very least, all this could be extended until the first half of next year, these experts clarify.

In the case of Meliá , investors insist on seeing the glass half full, perhaps without taking into account that there are still a few more quarters of very hard figures ahead. Nor is it that the future of the group is in danger, but there are reasons to move carefully.

The hotel sector in Spain “discounts an overly positive recovery scenario”, warn the Sabadell analysts. Therefore, they suggest maintaining “caution”.

“There are several quarters of reduced visibility and many doubts about the consumption habits of customers”, warn the experts of the Catalan entity. “There are still 3 quarters of low hotel occupancy and heavy losses ahead”, coincide in Bankinter.

At Meliá, the debt / ebitda ratio will increase up to 3 times in 2023, compared to 2.1 times today, according to Sabadell’s calculations.

The target price they calculate in the Sabadell is 3.5 euros per share, which implies a downward potential of 35%. At Deutsche Bank, although they are somewhat more optimistic, they obtain a price target of 3.9 euros, which shows a potential drop of 26%.

In summary. There are reasons and scope for the market to correct with Meliá to more reasonable levels and in accordance with the situation in the sector.

Technically speaking, the stock has not been able to go beyond 5.5 euros, the June highs, which suggests that there is resistance holding back gains.

Perhaps the best news, as noted by Bankinter, is that viability is not compromised and the hotel chain “has the financial capacity to overcome the crisis”

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