JPMorgan initiates Marriott stock coverage with neutral rating

Investing.com - JPMorgan initiated coverage on Marriott International (NASDAQ:MAR) with a neutral rating and a price target of $284.00 on Monday. The hotel giant, currently trading at $260.19 with a market capitalization of $71.27 billion, shows promising fundamentals according to InvestingPro data.

The investment bank views the risk/reward profile for the hotel giant as balanced, describing Marriott as a "high-quality, asset-light compounder" with attractive higher-end chain-scale and customer exposure. This assessment aligns with the company’s impressive gross profit margins of 81.89% and overall GOOD financial health score from InvestingPro.

JPMorgan believes Marriott’s current valuation at 14.5x 2026E EV/EBITDA appropriately accounts for these positive attributes, suggesting limited upside potential at current levels.

The firm attributes Marriott’s 1.5-2x discount versus peer Hilton since late 2023 to several factors, including lower average net room growth, with Marriott growing around 5% compared to Hilton’s 6-7%.

Other factors cited for the valuation gap include Marriott’s relatively more asset-heavy footprint with approximately 9% owned EBITDA versus Hilton’s roughly 5%, fee growth deviating from RevPAR/NRG algorithm, and Marriott’s slightly higher incentive management fee exposure at 15% of fees compared to about 9% for Hilton.

In other recent news, Marriott International has declared a quarterly cash dividend of 67 cents per share, reflecting an increase in earnings and robust cash generation. This announcement underscores Marriott’s commitment to returning value to shareholders. Jefferies analyst David Katz upgraded Marriott’s stock rating to Buy, raising the price target to $303, citing the company’s strong business model and potential for growth despite economic uncertainty. Meanwhile, BMO Capital Markets also raised its price target for Marriott to $265, maintaining a Market Perform rating, highlighting strong international market performance in the first quarter.

UBS analysts maintained a Neutral rating with a $299 price target, noting changes in Marriott’s room construction metrics, which could impact future growth evaluations. The company reported having 244,000 rooms under construction, including conversions, which altered the percentage of rooms compared to its total pipeline. Marriott’s CEO, Tony Capuano, mentioned a trend of consumers delaying hotel bookings, creating uncertainty for future reservations. Despite this, both leisure and business travelers continue to prioritize travel, albeit with a focus on value, particularly among lower-income consumers.

These developments illustrate Marriott’s strategic maneuvers amid a fluctuating market environment, with analysts offering varied perspectives on the company’s growth trajectory. The company’s financial health and strategic positioning are closely observed by investors, given the potential implications of market changes on revenue and growth prospects.

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