Panmure Liberum and Deutsche Bank have both retained 'buy' ratings on On the Beach Group (LSE:OTB), the online holiday company, after interim results showed record booking volumes alongside a sharp downgrade to full-year profit expectations driven by the fallout from the war in Iran.
Panmure Liberum cut its target price to 275p from 300p while Deutsche Bank lowered its target to 314p from 345p, but both brokers argued the shares, which closed at 138.8p, significantly undervalue the business.
On the Beach reported first-half booking volumes up 7% to a record 324,000, materially ahead of the wider package holiday market, with ATOL passenger volumes estimated to have grown around 3% over the same period.
However, the quality of those bookings has deteriorated. Average booking values fell 4% as customers switched from higher-value destinations in the UAE and eastern Mediterranean towards cheaper western Mediterranean trips, city breaks and shorter-duration travel.
Adjusted revenue fell 11% to £52.9 million, with adjusted pre-tax profit dropping to £2.3 million from £8.4 million a year earlier.
Management reinstated full-year guidance at £18 million to £25 million of adjusted pre-tax profit, roughly half the previously suspended range of £39 million to £43 million.
Panmure cut its full-year profit forecast by 46% to £22.1 million, effectively pushing its earnings trajectory out by 12 months. Deutsche Bank noted that the revenue decline almost exactly mirrored the fall in profit, highlighting how tightly costs are controlled.
Crucially, booking momentum has improved since the half-year end, with volumes up 9% over the most recent six weeks as the key summer departure period approaches.
Both brokers pointed to the company's strong strategic progress, including a 29% rise in app users, a 116% surge in city break volumes, and its position as the first UK package holiday company to launch on ChatGPT.
The balance sheet remains robust with £88 million of liquidity headroom, and the company returned £33 million to shareholders through buybacks and dividends during the period.
Panmure said it is looking through what it hopes will be a temporary impact from the Middle East conflict, while Deutsche Bank highlighted that the return to 9% booking growth in the second half suggests the business is already recovering market share.
The shares are off 19% this week at 137.28p and have dropped 38% year to date.