BofA cuts Park Hotels stock rating, lowers price target to $11

On Wednesday, BofA Securities issued a downgrade for Park Hotels & Resorts (NYSE:PK) stock, moving its rating from Neutral to Underperform and adjusting the price target to $11.00, a decrease from the previous target of $12.00. The revision comes amidst the firm’s broader cyclical industry analysis, which suggests that Park Hotels & Resorts could face several upcoming challenges.

The BofA Securities analyst pointed to a number of specific headwinds that Park Hotels & Resorts is likely to encounter. These include a higher exposure to international inbound travel, which may be more volatile, and less flexibility in labor and costs compared to its peers. Additionally, the company might need to invest more in capital expenditures than its full-service competitors.

Park Hotels & Resorts has had to deal with several difficulties in the recent past, such as placing its San Francisco properties into receivership and experiencing a slower-than-expected recovery in Hawaii. Despite these setbacks, the company was considered to have potential as an early cycle outperformer.

However, the analyst believes that the risks currently facing Park Hotels & Resorts outweigh the potential benefits. One of the risks highlighted is the company’s high current dividend payout ratio, which could be unsustainable given the forecasted challenges.

The new price target of $11.00 is based on a valuation of 10.0 times the company’s estimated 2025 EBITDA. This adjustment reflects the analyst’s view of the company’s prospects in light of the anticipated industry trends and company-specific issues.

In other recent news, Park Hotels & Resorts reported its fourth-quarter 2024 earnings, exceeding expectations with an earnings per share (EPS) of $0.32, compared to the forecasted $0.07, and revenue of $625 million, surpassing the anticipated $610.3 million. Despite these positive results, Jefferies downgraded Park Hotels & Resorts from Buy to Hold, reducing the price target from $19.00 to $10.00, citing concerns about international travel and U.S. consumer sentiment. Meanwhile, Citi maintained a Buy rating but lowered its price target from $18.00 to $16.00, adjusting its model based on updated financial results and forecasts. Citi’s analysis noted a decrease in expected 2025 EBITDA to $645 million but highlighted a slight increase in the full-year operating FFO projection to $2.10. Park Hotels & Resorts is also undertaking a significant $100 million renovation project at the Royal Palm Resort in Miami. The company anticipates RevPAR growth of 0-3% for 2025 and is targeting $300-$400 million in non-core asset sales. These developments reflect the company’s ongoing efforts to navigate economic uncertainties while focusing on strategic growth and asset management.

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