During the Monday trading session, the shares of the French multinational hospitality firms has risen by 6%, currently trading at €22.53. The move came as the Chief operating officer of the company, Simon McGrath made some optimistic remarks during his interview.
As he mentioned, just before the outbreak of COVID-19 pandemic, the main booking platforms of the firm, brought in $1,600,000 worth of bookings per day. Due to subsequent travel restrictions, this number fell dramatically to just $100,000. Simon McGrath stated that during this week, the value of bookings has risen to $400,000 a day. This is obviously, still far away from 2019 levels, however, the speed of recovery is quite impressive. As the governments across the world lift more travel restrictions, Accor might be well-positioned to regain more ground in terms of its revenue.
In 2019, the company has recorded €4,049 million in revenue, 23.3% higher than back in 2019. At the same time, a net profit of the year reached €485 million. During the same period, the firm issued an annual dividend of €1.05 per share.
However, despite these encouraging results, the outbreak of COVID-19 and subsequent travel restrictions had a devastating effect on the hospitality business. According to the most recent, first-quarter results, the revenue fell to €768 million, 17% lower than a year ago.
Despite those setbacks, Accor still managed to open 58 hotels, which represents around 8,000 rooms. Considering very difficult economic conditions for the industry, this seems quite a significant achievement/ The report also mentioned that the Group operates more than 5,000 hotels and owns a portfolio of 746,000+ rooms.
Can Accor (AC) Shares Return to 2019 Levels?
As we can see from this chart, the Accor shares had an uptrend in 2019. The stock has risen from €32 in June, to €42 by the end of the year. It is not surprising that so after the global outbreak of the COVID-19 pandemic, the shares lost roughly half of their value. The stock did try twice to get back to €30 level, but eventually the attempt failed. However, as the company sees some rebound in bookings, its shares now might be able to make a decisive breakthrough.
Despite those prospects, expecting that the stock will go all way up to €42, might be premature. The outbreak of a pandemic, as well as subsequent travel restrictions had delivered a serious blow to the entire hospitality sector. It might even take couple of years, before this industry can fully recover from those damaging effects.
At the moment, the earnings per share of the company stand at €1.56. This implies that the current price to earnings ratio is near 14.4. This suggests that on purely P/E analysis the stock is somewhat undervalued. As the business continues its recovery, this pricing might attract some new buyers.
On the other hand, it is highly doubtful, that Accor can maintain €1.05 per share dividend. Most likely, facing those serious losses, the management will be forced to cut those payouts significantly, or cancel them entirely. This, in turn, can make Accor shares much less appealing for income investors. Consequently, it might take months if not years, for the stock to return to pre-2020 levels.