Thomas Cook Shares Are Worth Nothing, Citigroup Analysts Say

(Bloomberg) --

Thomas Cook Group Plc’s shares are effectively worth nothing right now, according to analysts at Citigroup Inc., who cut their price target to zero pence from 28 pence.

The travel company’s earnings outlook is worse than expected and the amount of debt held wipes out the 738 million-pound ($940 million) worth of its tour-operator and airline arms, Citi says. This “implies zero equity value,” analysts led by James Ainley wrote in a note, cutting the stock to a sell rating.

Thomas Cook shares fell as much as 45% Friday, the most in seven years, adding to a 15% drop after the company reported results the previous day. Cook has warned that it faces another tough summer, while a lifeline loan from its lenders depends on the sale of the airline unit. The shares are now down around 90% in the past 12 months.

Thomas Cook Shares Are Worth Nothing, Citigroup Analysts Say

Ernst and Young LLP, Cook’s auditors, said the planned disposal and new financing arrangement make its future uncertain. Failure to manage the sale effectively could “cast significant doubt on the company’s ability to continue as a going concern,” the firm said in Cook’s half-year results statement.

Citi said the battering the company has taken may also “unsettle consumers and drive further weakness in bookings.” And it could cause hotel partners to tighten payment terms, putting further strain on the company’s finances. A spokesman for Thomas Cook said it had no comment on the Citi report.

Among other analysts, Oddo BHF also cut the stock to reduce from neutral on Friday. The company now has three buy ratings, seven holds and four sells, with an average price target of 28 pence, according to analysts tracked by Bloomberg.

Cook’s 750 million euros ($838 million) of bonds maturing in 2022 also fell on Friday, and are now quoted almost 20 cents on the euro lower since the beginning of the week at 47 cents, according to data compiled by Bloomberg. On Thursday, trading volumes were five times the last month’s daily average, according to MarketAxess.

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