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(Sharecast News) - Peel Hunt upgraded its stance on pub group JD Wetherspoon on Tuesday to 'add' from 'hold' following recent share price weakness.
The broker said it was cutting its 2026 pre-tax profit estimate by 12% to reflect a shortfall in gross profit in the first half, not offsetting higher repair costs in particular.
It noted that like-for-like sales were up 4.8% in the first half but pre-tax profit fell by 10m to 22m.
"The bulk of this year's incremental costs fell in H1 but this was not matched with price increases," the broker said.
"According to CGA by NIC, JDW's average drinks price discount to the sector rose to 35% in December. Given JDW's investment in site, product range and service, we believe this 35% discount understates the gap in value for money, giving JDW the pricing power (despite the off-trade competition) to raise prices sufficiently to generate profit growth against a backdrop of lower increases in taxation from April 2026."
Peel Hunt said that due to an easing in labour cost pressures and increasing pricing firepower, it is retaining its 750p price target. This assumes JDW holds its 7.7x EBITDA rating over the next year.
At 1340 BST, the shares were up 3.3% at 638.03p.
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