The Motley Fool

Does the Whitbread share price have further to go?

Image source: Getty Images.

Buoyed by the agreement to sell Costa Coffee to Coca-Cola for £3.9bn, Whitbread’s (LSE: WTB) share price has topped out above 4,700p for the first time since 2015. The shares are up by nearly 20% over the past month — but could they be about to climb even higher?

Acquisition target

No sooner has Whitbread agreed a sale for Costa than attention shifted to what may happen to the group’s other businesses. There’s speculation that the other arm, Premier Inn, could find itself a viable acquisition target by a larger hotel chain. Interested parties in the budget-priced hotel chain include global hoteliers, such as Intercontintal, Accor and Marriott, as well as private equity groups.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

But even if a bid does not materialise, there are alternative ways to unlock value from the Premier Inn business. Some analysts reckon there is a potential asset management opportunity from the sale and leaseback of some of its freehold properties, which could raise up to £4bn in cash. Others suggest another way to become more ‘asset-light’ would be for Premier Inn to make the transition to a franchise model — such a move would also reduce the volatility of earnings.

Improve returns

After Costa’s sale is completed, improving returns at Premier Inn would become Whitbread’s main priority, but there’s no consensus among analysts over the best course of action. And with negative like-for-like sales growth in the UK, there’s growing concern over the impact of Brexit uncertainty and oversaturation on the business.

Whitbread is looking to push forward Premier Inn’s expansion into Germany to offset the slack in the UK, but with an untested brand and strategy, future growth is far from assured. With this in mind, I reckon the group still faces sizeable execution risks over the medium term.

Expansion spree

Meanwhile, bookmaker William Hill (LSE: WMH) is going on an expansion spree in a bid to build up its US presence. On Wednesday, the company announced that it has agreed a new partnership with American casino group Eldorado Resorts to provide digital and land-based sports betting services.

It’s the third such deal for the company across the Atlantic, which follows a recent US Supreme court ruling to legalise sports betting in the country. The US, with a population that is nearly five times greater than the UK, is potentially a massive growth opportunity for William Hill.

This opportunity also comes at a convenient time, given that the UK government is set to drastically reduce the amount which can be wagered on the gaming industry’s lucrative fixed-odds betting terminals. But of course, William Hill is not the only company looking to grab a slice of the action in the US. In recent months, Paddy Power Betfair and GVC Holdings have also entered into similar deals with their US partners.

Still, it’s not as if the market has priced-in much of this international opportunity to its share price. Valuations are undemanding, with William Hill valued at just 12.2 times its expected earnings this year. Prospective investors can also find a good yield here — 5.2% at the time of writing.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Jack Tang has no position in any shares mentioned. The Motley Fool UK has recommended GVC Holdings, InterContinental Hotels Group, and Paddy Power Betfair. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.