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On Wednesday, Jefferies analyst David Katz downgraded Host Hotels & Resorts Inc. shares, moving the rating from Buy to Hold and slashing the price target to $14 from the previous $20. The revision comes after a reassessment of the company's future year multiples and a discounted cash flow (DCF) valuation. Katz noted that the new price target is based on lowered blended fiscal year 2025/26 multiples of 9.5 times enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), 8.0 times price to adjusted funds from operations (P/AFFO), and 10.0 times price to free cash flow to equity (P/FCFE), down from the previous 11 times, 10 times, and 12 times, respectively. According to InvestingPro, the company currently trades at an EV/EBITDA multiple of 9.07x and offers an attractive dividend yield of 8.66%.
The downgrade was influenced by management's cautious stance, as expressed in the last quarter's earnings call, where they indicated limited visibility on the economy, international inbound travel, and potential margin pressure. Despite Host Hotels' strategic mergers and acquisitions (M&A), return on investment (ROI) projects, and a robust balance sheet, the downgrade to Hold reflects the analyst's concerns over a decelerating macroeconomic environment.
Katz also pointed out that the near-term challenges the company faces are already reflected in the current trading level, which stands at 8.6 times fiscal year 2025 estimated EV/EBITDA. This suggests that the market has priced in the potential headwinds.
Host Hotels & Resorts Inc., a lodging real estate company, has been executing thoughtful M&A and ROI projects, which Katz acknowledged. However, the downgrade reflects the broader economic concerns that may impact the company's performance.
Investors and stakeholders of (NASDAQ:HST) now have a new price target to consider as they assess the company's financial outlook in light of the revised expectations from Jefferies.
In other recent news, Host Hotels & Resorts Inc. reported fourth-quarter earnings and revenue that exceeded analysts' expectations. The company posted adjusted earnings per share of $0.15, surpassing the consensus estimate of $0.13, while revenue reached $1.43 billion, beating expectations of $1.37 billion. Host Hotels also reported a 3.3% year-over-year increase in comparable hotel Total (EPA:TTEF) RevPAR for the fourth quarter, driven by improvements in food and beverage revenues from group business. For the full year 2024, the company saw a 2.1% growth in comparable hotel Total RevPAR.
In terms of analyst activity, Morgan Stanley (NYSE:MS) upgraded Host Hotels' stock rating from Underweight to Equalweight but reduced the price target to $15.00. Citi also adjusted its price target for Host Hotels to $19.00 while maintaining a Buy rating, citing revised financial models and updated operating metrics. Jefferies, too, maintained a Buy rating but lowered the price target to $20.00, highlighting the company's growth potential through recent acquisitions and capital projects.
Despite the adjustments, analysts from Citi and Jefferies express confidence in Host Hotels' future performance, citing factors like a strong balance sheet and strategic initiatives. Host Hotels has acquired $1.5 billion worth of hotel properties in 2024 and returned $844 million to shareholders through dividends and share repurchases. Looking forward, the company anticipates 2025 comparable hotel Total RevPAR growth of 1.0% to 3.0%, driven by continued improvement in group business and steady leisure demand.
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