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On Friday, Morgan Stanley (NYSE:MS) analyst Stephen W. Grambling upgraded Host Hotels stock from Underweight to Equalweight, while also reducing the price target to $15.00 from the previously set $16.00. Grambling cited the stock’s recent performance, which has brought its valuation below that of its peers and to trough levels not seen since the pre-pandemic era, suggesting a more balanced risk-reward scenario for investors. According to InvestingPro data, the stock has declined nearly 18% over the past six months and currently trades at an attractive EV/EBITDA multiple of 10.1x, while offering a substantial 7.35% dividend yield.
Despite the upgrade, Host Hotels’ fundamentals may still face challenges due to deteriorating trends in key markets, according to Grambling. The company has experienced greater downward revisions compared to its peers, leading to a current valuation that is more in line with consensus estimates. Morgan Stanley’s projections for the company’s 2025 and 2026 EBITDA are now 6% and 5% below consensus, respectively, a shift from their previous estimates of 5% and 8% forward. InvestingPro analysis reveals that two analysts have recently revised their earnings downward, though the company maintains a strong financial health score of "GREAT."
Grambling pointed out that Host Hotels’ current enterprise value of $15.9 billion is at its lowest over the past two decades, with the exception of the COVID-19 pandemic period when hotels were closed. This valuation reflects the compression on lower consensus estimates.
The analyst also noted Host Hotels’ relatively lower financial leverage, with a ratio of 3.2x compared to the peer average of 5.3x. This lower leverage may limit the downside for the company if market conditions worsen. However, Grambling remains cautious about the company’s future revenue per available room (RevPAR) performance, as Host Hotels continues to have the highest competitive supply within its peer group.
In other recent news, Host Hotels & Resorts Inc. reported fourth-quarter earnings and revenue that exceeded analyst expectations. The company posted adjusted earnings per share of $0.15, surpassing the consensus estimate of $0.13, while revenue reached $1.43 billion, above the expected $1.37 billion. Host Hotels also announced a 3.3% year-over-year increase in comparable hotel Total (EPA:TTEF) Revenue Per Available Room (RevPAR) for the fourth quarter. For the full year 2024, comparable hotel Total RevPAR grew by 2.1%. Additionally, Host Hotels acquired $1.5 billion worth of hotel properties in 2024 and returned $844 million to shareholders through dividends and share repurchases.
Analyst firms have adjusted their price targets for Host Hotels, with Citi lowering its target to $19 and Jefferies to $20, both maintaining a Buy rating. Citi’s revision considers the company’s updated operating metrics and financial model, while Jefferies highlights Host Hotels’ potential growth driven by acquisitions and capital projects. Analysts also noted challenges such as higher labor costs and a slower recovery at specific properties. Despite these challenges, both firms express confidence in Host Hotels’ future performance, citing its strong balance sheet and strategic initiatives. Investors will likely keep a close watch on the company’s developments as it navigates the post-pandemic recovery.
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