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On Monday, Jefferies analyst David Katz upgraded Marriott International (NASDAQ:MAR) stock from Hold to Buy and increased the price target to $303 from $226. Katz highlighted the strength of Marriott’s business model, suggesting it is well-positioned to grow even amid the current uncertain business climate. The company maintains a "GOOD" overall financial health score according to InvestingPro analysis, with the stock currently trading at a P/E ratio of 29.5x. He indicated that peak multiples of 17.5 times for Marriott are justified, as the stock is currently trading at a mid-range multiple of 15.1 times.
Katz’s upgrade is based on the transition from cyclical revenue per available room (RevPAR) to more durable mid-single-digit net unit growth (MSD NUG) as the primary driver of earnings growth. He noted that this shift provides greater visibility for long-term fee, earnings before interest, taxes, depreciation, and amortization (EBITDA), and free cash flow (FCF) growth with high single-digit/low double-digit compound annual growth rate (CAGR). The company’s impressive gross profit margin of 81.89% and revenue growth of 4.8% in the last twelve months support this positive outlook. InvestingPro subscribers can access 10+ additional key metrics and insights about Marriott’s financial performance.
The analyst emphasized the earnings growth and durability of Marriott and Hilton justify a higher valuation. He pointed out that the current economic uncertainty presents an opportunity, as the companies have demonstrated the ability to sustain growth through various challenges, including the COVID-19 pandemic and ongoing market volatility.
Katz also underscored the proven resilience of the core business model, which has delivered consistent mid-single-digit NUG despite anemic and volatile RevPAR since 2017. He suggested that historical performance shows that C-corps have consistently delivered on this front, even with highly cyclical RevPAR. Supporting this view, InvestingPro data shows management has been actively buying back shares, and the company has raised its dividend for three consecutive years, with a current dividend yield of 0.98%. The analyst’s outlook for Marriott is positive, with the upgraded rating and price target reflecting an expectation of continued robust performance.
In other recent news, Marriott International reported strong financial results for the first quarter of 2025, exceeding market expectations. The company achieved earnings per share (EPS) of $2.32, surpassing the forecast of $2.26, and reported revenue of $6.26 billion, beating the anticipated $6.20 billion. This performance reflects robust international market growth despite some challenges in the U.S. and Canada. Additionally, Marriott announced an increase in its quarterly cash dividend to 67 cents per share, highlighting its strong cash generation and commitment to shareholder value.
Marriott’s full-year revenue per available room (RevPAR) growth guidance was slightly lowered, though the company remains optimistic about its growth prospects, supported by the acquisition of CitizenM, which enhances its luxury segment offerings. BMO Capital Markets raised its price target for Marriott shares from $250 to $265, maintaining a Market Perform rating, acknowledging the company’s strong international performance and strategic positioning. However, the guidance for the second quarter was considered light, with a modest reduction in EBITDA expectations.
Marriott continues to focus on digital transformation to enhance operational efficiency and is seeing strong growth in its loyalty program, Marriott Bonvoy. Despite macroeconomic uncertainties, the company is strategically positioned with a significant international presence, which is expected to mitigate some risks associated with market fluctuations. These developments underscore Marriott’s resilience and adaptability in a challenging economic environment.
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