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JPMorgan rates European travel operator stocks as „overweight”

Investors should buy stocks of European travel operators, which have positioned themselves to benefit from rising demand, JPMorgan Chase & Co. said as it started coverage of companies in the industry.

First Choice Holidays Plc, TUI AG, Kuoni Reisen Holding AG and MyTravel Group Plc were recommended as „overweight” by James Ainley and Tejpal Dhami, London-based analysts at the third-biggest US bank, JPMorgan Chase & Co. That is the bank's highest rank of recommendation and means investors should hold more of those stocks than their weightings on benchmarks.
„Although the market consensus is that they remain strategically challenged, we think that it is old news and each is adapting to the new world,” wrote Ainley and Dhami in a report to investors today. Travel operators are expanding from the „price-competitive short-haul market” into long-haul services, where they don't face the competition of low-cost carriers, the analysts wrote in explaining their reasons for the recommendation. In addition, „we continue to see a wealth of opportunities in the niche and specialist markets,” they wrote.
These markets offer „better growth prospects” and carry less risk, they added. Manchester-based MyTravel earlier this month agreed to merge with Germany's Thomas Cook AG, Europe's second-largest travel company, to cut costs and combat competition from low-cost airlines and Web-based travel agents. (Bloomberg)