Goldman Sachs raises Hilton stock price target to $42

On Monday, Goldman Sachs updated its assessment of Hilton Grand Vacations (NYSE:HGV), increasing the company’s price target from $37.00 to $42.00, while maintaining a Sell rating. The adjustment follows Hilton’s fourth quarter results, which surpassed estimates and showcased sales growth driven by new initiatives. According to InvestingPro data, HGV’s current trading price of $43.46 is near its calculated Fair Value, with the stock showing a robust 24.3% revenue growth over the last twelve months.

Hilton Grand Vacations, known for its timeshare properties, reported fourth-quarter earnings that exceeded Visible Alpha Consensus Data predictions, with InvestingPro showing EBITDA reaching $965 million. The growth was attributed to the introduction of HGV Max, a new membership program, and initial sales from the upcoming Ka Haku Hawaii property, set to launch in 2026. InvestingPro analysis reveals strong financial health metrics, with current assets significantly exceeding short-term obligations. The company anticipates mid-single to high-single digit percentage growth in contract sales for 2026, fueled by low-single digit percentage growth in tours and mid-single to high-single digit percentage growth in volume per guest, with additional support from new HGV Max members.

In addition to sales performance, Hilton Grand Vacations has been refining its securitization strategy, which is expected to free up approximately $700 million in cash. The company plans to allocate $200 million of this to enhance its share repurchase program, increasing it to $600 million for the year. This aligns with one of several InvestingPro Tips highlighting management’s aggressive share buyback strategy, with additional insights available to Pro subscribers. Although the share buyback initiative is projected to take time to fully implement, Goldman Sachs estimates it could add approximately $5 per share in equity value, with an impact of $2 to $3 in the first year.

However, the company is also facing some cost pressures, particularly concerning interest expenses due to the optimization of its securitization. Despite these challenges, revenue growth is expected to outpace EBITDA growth in the current year, with analysts forecasting continued profitability as revealed in InvestingPro’s comprehensive analysis of the company’s $4.21 billion market cap operation. The first quarter may experience the most significant impact, with an estimated 400 basis points of margin compression. Goldman Sachs forecasts Hilton Grand Vacations’ EBITDA to reach $1.135 billion in 2025, which is in line with the company’s guidance range of $1.125 to $1.165 billion, contingent upon further evidence of volume per guest performance throughout the year. Despite the positive aspects of Hilton’s recent performance and strategic financial maneuvers, Goldman Sachs retains a cautious stance with a Sell rating on the stock.

In other recent news, Hilton Grand Vacations reported a significant miss in its fourth-quarter 2024 earnings, with earnings per share (EPS) at $0.49 compared to the expected $0.81, and revenue totaling $1.28 billion against a forecast of $1.3 billion. Despite this, the company saw a 9% year-over-year growth in contract sales, reaching $837 million. The company also announced its plans to increase annual share repurchases to approximately $600 million starting in 2025, up from $432 million in 2024. S&P Global Ratings placed Hilton Grand Vacations on CreditWatch with negative implications due to anticipated high leverage, which is expected to remain above the 4.5x downgrade threshold until at least 2025. Meanwhile, Mizuho (NYSE:MFG) Securities raised the company’s price target to $60 from $55, maintaining an Outperform rating, citing successful integration efforts with Bluegreen Vacations (NYSE:BXG) and the introduction of the HGV Max program. Hilton Grand Vacations issued $1.8 billion in new corporate debt to fund the Bluegreen Vacations purchase, but did not reduce its net debt as initially planned. The company is also working on optimizing its financing business, aiming to increase non-recourse borrowing and enhance shareholder returns.

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