In the last 4 years Saga (LSE: SAGA) Stock prices are behaving like a roller coaster that is finally declining. Shares in the travel and insurance business over the age of 50 continued to fall from a high of over £ 30 four years ago to a record low of around £ 1.20 last year.
What is the cause of this 96% decrease? And should you buy stocks at today’s low prices? Let’s take a look.
Why did Saga’s stock price plummet?
Saga’s share price began to fall near the end of 2017 after the company named it “temporary marketing costs of £ 10m.”Customer acquisition costs“.
At that time, the increase in marketing budget seemed strange. The Saga brand is already well known and this additional cost will reduce profits the following year by 5%.
This decision seems to have been the first indicator that something was wrong. And at the end of 2018, the problem began to become apparent. Both business insurance and the travel segment over 50 have lost customers. fast. And when investors asked for an explanation, management said it was “Over-focus on the short term“.
The announcement of £ 310m of non-cash impairment costs only added fuel to the fire. The previously profitable business has turned into a money loser. Dividends were halved and Saga’s stock price continued to plummet.
After four years of terrible decisions, CEO Lance Bachelor was expelled from his position in January 2020. And just as the company started returning to the course, a pandemic occurred. The company lost a record £ 313 million in 2020 due to the lack of passengers on the cruise ship. As a result, stock prices fell again.
By the end of 2020, Saga appeared to be in danger of collapsing. The business needed to raise money quickly because it was piled up in debt and had no income to cover the bills. Debt lending in capacity has raised investors £ 150m through equity offerings.
Wait a minute. What is coming over the hill? Is it a bird? Is it an airplane? No, it’s a £ 100m knight Englishman!
Sir Roger de Khan, the former owner of Saga 16 years ago, came over Purchased most of the issued shares.. He currently owns about 20% of the business and will be the non-executive chairman of the board for the next three years.
Will Saga’s stock price recover in 2021?
The newly raised capital allowed the company to restructure and manage short-term debt. And since the rescue package arrived, the stock price has risen 120%.
But the company still has a long way to go. In my opinion, the recovery of Saga’s stock price is directly linked to the resumption of cruise ship operations.Fortunately, as I have discussed earlier, there are some in the cruise industry Highest customer loyalty level in any sector.. As a result, 65% of Saga’s customers do not request a refund and will go on a trip as soon as the ship departs again.
If the trip can be resumed in the latter half of 2021, I think Saga will finally return to the course. And with the new management in control, it’s a business I’d like to consider adding to my portfolio.
Zaven Boiler Zian I do not own any shares in Saga. The Motley Fool UK does not have a position in any of the listed shares. The views expressed about the companies mentioned in this article are those of the author and may differ from the official recommendations made by subscription services such as Share Advisor, Hidden Winners, and Pro. Here at The Motley Fool, by considering different insights, Better investors than us.
Saga’s stock price soared 120% in 3 months! Should I buy stock now?
https://www.fool.co.uk/investing/2021/01/22/the-saga-share-price-has-surged-120-in-3-months-should-i-buy-the-shares-now/ Saga’s stock price soared 120% in 3 months! Should I buy stock now?