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At 4,723p, is IHG Share Price a Bargain or a Value Trap?

--FILE--View of an InterContinental Hotel in Shanghai, China, 9 March 2018. InterContinental Hotels Group (IHG) is doubling down on the China market and developing brands in the luxury segment to compete against other hospitality giants, according to its chief executive for the country. "Luxury is a big focus area for us. It's a US$60 billion segment that's expected to grow by half over the next decade," said Jolyon Bulley, CEO of IHG Greater China. "We felt that in the upper-luxury segment we have a gap, therefore we are looking to either develop, or acquire brands. For now we feel we have levelled out. We have mainstream luxury in the InterContinental brand, boutique luxury in Kimpton and upper luxury in Regent. I see huge potential for these brands."

IHG share price collapsed by more than 4% on Friday as travel and recreational stocks retreated. The stock crashed to a low of 4,625p, which was the lowest level since September 8 of this year. It has fallen by over 6% from its highest level this week. Year-to-date, the stock has fallen by more than 4% and underperformed the FTSE 100 and the flagship travel ETF.

Intercontinental Hotels Group stock slips

Intercontinental Hotels Group is one of the biggest hotel groups in the world. The company owns some of the best known brands like Six Senses, Intercontinental Hotels & Resorts, Regent, Crown Plaza, and Holiday Inn among others. It has over 6,000 hotels globally and more than 882k rooms. Unlike most hotel groups, IHG uses three approaches to make money: franchising, management, and owned hotels. 

IHG has had a strong year as the world economy reopens. Its most recent results showed that its revenue rose by 51% from the same period n 2021. It opened 96 hotels with 15k rooms in the sameoeriod and signed additional 210 hotels. The compay’s total revenue rose to over $840 million while its operating profit rose to $377 million. Analysts believe that this growth will continue in the coming months.

IHG’s business model gives it room to navigate this high inflationary environment since it makes most of its money from franchising and management. As such, with demand for hotel rooms being there, the company will continue to generate substantial fees.

IHG share price forecast

The daily chart shows that the IHG stock price has not had a good year. Indeed, the stock has remained in a tight range this year with gains facing substantial resistance. The stock has remained between the important support at 4,320p and resistance at 5,373p. It has also moved below the 25-day moving average while the Awesome Oscillator has dropped below the neutral level. 

Therefore, there is a likelihood that the Intercontinental Hotels Group share price will continue falling as sellers target the next key support at 4,500p. A move above the resistance at 4,800p will invalidate the bearish view.

IHG share price