Barclays cuts Hyatt Hotels target to $151, keeps Equalweight

On Friday, Barclays (LON:BARC) analyst Brandt Montour adjusted the price target for Hyatt Hotels Corporation (NYSE:H) shares, reducing it from $162.00 to $151.00. The firm maintained an Equalweight rating on the stock. The adjustment comes as Hyatt's stock, currently trading at $147.38, has experienced a significant 10.15% decline over the past week. According to InvestingPro data, analyst targets for the stock range from $127 to $207, reflecting varied market expectations. Montour's assessment followed Hyatt's announcement of a fourth-quarter earnings before interest, taxes, depreciation, and amortization (EBITDA) that did not meet expectations, along with a less promising outlook for fiscal year 2025. InvestingPro analysis reveals that Hyatt maintains impressive gross profit margins of nearly 69% and has achieved an EBITDA of $673 million in the last twelve months. The company's overall financial health score stands at 3.15, rated as GREAT by InvestingPro's comprehensive evaluation system.

The analyst pointed out that the consensus had an overly optimistic Owned Hotel figure, which likely did not fully consider the impact of asset sales from the previous year. The discrepancy in Hyatt's guidance, according to Montour, was largely due to the Managed and Franchised (M&F) EBITDA, which fell short of expectations. This was attributed to a weaker-than-anticipated core net unit growth (NUG) guidance of 4-5%, excluding the effects of the Venetian, which is a licensing agreement that only generates fees for rooms booked through Hyatt, thereby diluting fees.

Despite this setback, Montour noted a silver lining, with approximately 50-60 basis points of the reduced NUG resulting from the anticipated loss of a single hotel portfolio in Europe, specifically the Lindner hotels. Although Hyatt's guidance has accounted for the potential loss of these contracts, there remains a possibility that the company might retain them. The analyst had initially expected Hyatt to achieve around 6% core NUG in 2025, assuming that the one-time contract terminations and delays experienced in 2024 would be resolved or reversed.

Hyatt's financial performance and future projections play a critical role in the valuation and stock performance. The revised price target reflects Barclays' recalibrated expectations based on the latest earnings report and guidance provided by Hyatt. The Equalweight rating suggests that Barclays views Hyatt's stock as being properly valued at the time of the analysis, neither undervalued nor overvalued based on the information available.

In other recent news, Hyatt Hotels Corporation has reported fourth quarter 2024 earnings that missed analyst expectations. The company posted adjusted earnings per share of $0.42, falling short of the consensus estimate of $0.79. Revenue for the quarter came in at $1.72 billion. In addition, Hyatt announced a significant development, the planned acquisition of Playa Hotels & Resorts for approximately $2.6 billion.

Recent developments also include a 5.0% growth in comparable system-wide hotels RevPAR in the fourth quarter compared to the same period in 2023. Hyatt's full-year net income for 2024 was reported at $1.3 billion and adjusted EBITDA at $1.1 billion. Looking forward, Hyatt projects a 2.0% to 4.0% growth in 2025 full year comparable system-wide hotels RevPAR, and a net rooms growth of 6.0% to 7.0%. The company expects 2025 adjusted EBITDA to be between $1.1 billion and $1.15 billion.

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