MS says low valuations make European travel and leisure attractive going into 2026

Morgan Stanley says the European travel and leisure industry looks attractive compared to the broader market, after weakness across sub-sectors caused the stocks to underperform against other European equities last year

The industry is a "classic stock-picker's market", MS says, naming Compass CPG.L, Flutter FLTRF.L, Entain ENT.L and Accor ACCP.PA as its top picks, all rated "overweight"

It sees an +18% market cap weighted sector upside driven by the first two groups

The broker downgrades French food services firm Sodexo EXHO.PA to "underweight" from "equal-weight", saying it lacks catalysts despite a cheap valuation

"We see ongoing risk to forecasts and think the turnaround will take longer than expected," MS says

Sodexo joins "underweight"-rated Scandic SHOTE.ST and Playtech PTEC.L among the broker's least preferred stocks