Jefferies cuts Park Hotels stock rating to hold, target to $10

On Wednesday, Jefferies analyst David Katz issued a downgrade for Park Hotels & Resorts (NYSE:PK) stock, changing the rating from Buy to Hold and significantly reducing the price target to $10.00 from the previous $19.00. Katz's revision is based on a lowered forecast for fiscal years 2025 and 2026, adjusting the multiples of EV/EBITDA to 8X, price to adjusted funds from operations (P/AFFO) to 6X, and price to free cash flow to equity (P/FCFE) to 8X, down from the earlier estimates of 10X, 11X, and 11.5X, respectively.

The downgrade reflects concerns about the potential downturn in international inbound travel and U.S. consumer sentiment, which could impact Park Hotels & Resorts, especially given its exposure to the Hawaii market. Katz acknowledges the company's effective capital allocation in return on investment (ROI) projects, which may present long-term opportunities, but he also notes that the current macroeconomic environment and a slowdown in leisure travel could hinder non-core asset sales and limit the near-term potential for the stock's appreciation.

Katz's analysis includes a five-year discounted cash flow (DCF) valuation, which supports the newly established price target. Despite the company's stock trading at 7.9X of its forecasted 2025 EBITDA, which is at the lower end of its historical range, Jefferies sees the broader market deceleration as a limiting factor for growth.

The reassessment by Jefferies arrives amid a challenging period for the travel and leisure industry, as companies navigate the uncertainties of a changing global economic landscape. Park Hotels & Resorts, with its portfolio of properties and investment in ROI projects, faces the task of adapting to these conditions while managing investor expectations in light of the revised outlook.

In other recent news, Park Hotels & Resorts reported fourth-quarter 2024 earnings that exceeded expectations, with an earnings per share (EPS) of $0.32, significantly higher than the forecasted $0.07. The company also surpassed revenue predictions, posting $625 million against an expected $610.3 million. Despite these strong financial results, Citi analysts revised their price target for Park Hotels & Resorts from $18.00 to $16.00, maintaining a Buy rating. The analysts' updated model reflects a decrease in 2025 expected EBITDA to $645 million from $666 million, though operating Funds From Operations (FFO) for the first quarter of 2025 is now estimated at $0.45, up from $0.41.

Park Hotels & Resorts is undertaking significant renovations, including a $100 million project at the Royal Palm Resort in Miami. The company generated $600 million in hotel revenue and achieved an adjusted EBITDA margin of 24.6% for the fourth quarter. For the full year, the adjusted EBITDA was reported at $652 million, with an adjusted FFO per share of $2.06. Looking ahead, Park Hotels & Resorts projects RevPAR growth of 0-3% for 2025 and anticipates an adjusted EBITDA between $610 million and $670 million. The company is also targeting $300-$400 million in non-core asset sales in 2025.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.