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On the Beach share slide is buying opportunity for Berenberg
The fall in On the Beach's shares is a "compelling" buying opportunity for a structural growth stock, Berenberg analysts said as they reiterated their 'buy' rating on the shares.
The online beach holiday company's first half results on 10 May were slightly weaker than expected but the shares decline of more than 25% is overdone, Berenberg said. Management said disappointing growth was caused by higher airline seat prices after the collapse of low-cost carrier Monarch. Air fares have gone back to normal and this should help On the Beach.
The company, which lets customers put together their own package holiday from thousands of hotels and flights, is taking market share and is investing in marketing without expenses increasing as a percentage of sales, the analysts said.
More than 40% of the UK holiday market is yet to shift online and with cash in the bank On the Beach can grow without much more capital. Investors also have a free option on the company expanding overseas through its nascent international operation.
"OTB remains a high-margin, high-return structural growth story, and the pull-back creates a compelling buying opportunity," the analysts said.
The analysts kept their 'buy' rating for On the Beach and left their price target unchanged at 600p a share. At the time of publication the share price was 473p.