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On Wednesday, Xenia Hotels & Resorts (NYSE:XHR) experienced a shift in market sentiment as Jefferies analyst David Katz downgraded the company's stock rating from Buy to Hold. The firm also significantly reduced the price target for Xenia's shares, bringing it down to $10.00 from the previous $18.00.
Katz's decision to downgrade is based on a recalibration of the expected multiples for the years 2025 and 2026. The new estimates are set at 8.5X EV/EBITDA, 6.5X P/AFFO, and 8.5X P/FCFE, a notable decrease from the former 11X across all metrics. This adjustment reflects a more conservative outlook on the company's financial performance.
The analyst pointed out that Xenia's shares are currently trading at the lower end of their historical range, with an 8.8X multiple on the 2025 estimated EV/EBITDA. Despite this valuation, Katz expressed concerns over several factors that could dampen the stock's near-term prospects. These include the prevailing macroeconomic uncertainty, a stagnant market for transactions, and projections of slowing demand in leisure and business travel sectors.
Katz's comments underline the rationale behind the downgrade and price target reduction, emphasizing a cautious stance on Xenia Hotels & Resorts amid the current market conditions. The revision of the price target to $10.00 from $18.00 represents a significant shift in expectations for the company's stock performance.
Investors and market watchers will likely monitor Xenia Hotels & Resorts closely in the wake of these changes, as the company navigates through the challenges outlined by Jefferies.
In other recent news, Xenia Hotels & Resorts reported a net loss of $638,000 for the fourth quarter of 2024, missing analysts' earnings expectations. The company's revenue for the quarter was $261.85 million, slightly below the forecast of $263.42 million. Despite these results, Xenia achieved a full-year net income of $16.1 million, with a Same Property Revenue Per Available Room (RevPAR) increase of 1.6% over the year. Analysts at Jefferies adjusted their outlook on Xenia Hotels & Resorts by reducing the price target to $18 from $20 while maintaining a Reduce rating. This reflects a cautious stance due to broader macroeconomic concerns affecting the leisure travel sector. Xenia's strategic investments, such as the renovation of the Grand Hyatt Scottsdale, are expected to contribute significantly to 2025 earnings, with projected low $20 million EBITDA. The company anticipates a Same Property RevPAR growth of 3.5% to 6.5% for 2025, with an expected 7% increase in Adjusted EBITDAre. Looking ahead, Xenia's CEO expressed confidence in the company's strategic positioning, particularly highlighting the Scottsdale renovation's expected impact.
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