Broker snap: Package tour companies downgraded

20th Nov 2009 21:04

Package tour giants Thomas Cook and TUI Travel were the two worst performing blue-chip stocks on Friday morning after Morgan Stanley downgraded both stocks.Thomas Cook has been cut to 'underweight' from 'equal weight' and its price target chopped to 230p from 270p, while TUI Travel has been downgraded to 'equal weight' from 'overweight', and its price target reduced to 290p from 320p.The US broker thinks that both companies face a tougher year next year having squeezed out most of the juice to be had from their respective mergers (Thomas Cook with MyTravel and TUI with First Choice).'Thomas Cook appears to us to have the most forecast risk as it has above-average margins and, we believe, needs to refinance its debts quicker than the market believes, potentially including new equity,' Morgan Stanley believes.Of the two, Morgan Stanley prefers TUI, where it sees larger scope for margin recovery and greater opportunity to expand in niche markets.