JPMorgan initiates Choice Hotels stock with underweight rating

Investing.com - JPMorgan initiated coverage on Choice Hotels (NYSE:CHH) on Monday with an underweight rating and a price target of $124.00. The hotel chain, currently valued at $5.66 billion, is trading near its 52-week low of $116.13, according to InvestingPro data.

The investment bank cited the hotel chain’s modest growth outlook as a key factor in its rating decision, forecasting adjusted EBITDA to grow in the low-single-digit range through 2027.

JPMorgan noted this growth rate puts Choice Hotels several hundred basis points below competitor Wyndham Hotels & Resorts, which is expected to achieve a 7% EBITDA compound annual growth rate through 2027.

Despite slower growth prospects, Choice Hotels currently trades at 11.2 times 2026 estimated EV/EBITDA, representing a premium of approximately 1 times compared to Wyndham’s 10.1 times 2026 estimated multiple.

The bank identified Choice Hotels’ footprint expansion of just 1% expected in fiscal year 2025 as a key growth limitation, significantly trailing competitors Wyndham (+4%), Marriott (+5%), and Hilton (+6-7%), as the company transitions to a more revenue-intensive, higher-chainscale portfolio.

In other recent news, Choice Hotels International Inc . reported its first-quarter 2025 financial results, which fell short of analyst expectations. The company announced an adjusted earnings per share (EPS) of $1.34, missing the forecasted $1.38, and reported revenue of $333 million, below the anticipated $348.15 million. Despite these figures, Choice Hotels experienced a 5% year-over-year increase in adjusted EPS and a 4% rise in adjusted EBITDA to $129.6 million. The company also provided guidance for the full year 2025, projecting EPS between $6.90 and $7.22.

Additionally, Choice Hotels shareholders approved a new 2025 Long-Term Incentive Plan (LTIP), which includes the issuance of stock options and awards. This plan aims to incentivize the company’s employees, officers, and directors. During the 2025 Annual Meeting, shareholders ratified Ernst & Young LLP as the independent accounting firm for the fiscal year and approved an advisory vote on executive compensation.

In terms of analyst activity, the company’s stock performance was noted by firms such as Bank of America, which discussed the company’s resilience and strategic positioning. The company highlighted strong growth in its domestic revenue per available room (RevPAR) and extended stay segments. Furthermore, Choice Hotels emphasized its strategic transformation and growth potential, particularly in international markets and its extended stay portfolio.

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