On Thursday, Stifel analysts upheld their Buy rating on PebbleBrook Hotel Trust (NYSE:PEB) shares with a steady price target of $16.25, above the current trading price of $13.77. With a market capitalization of $1.66 billion, PEB shows signs of being undervalued according to InvestingPro analysis. The focus of their commentary was on the company’s significant presence in the Los Angeles market, which remains robust and operational despite potential challenges.
PebbleBrook Hotel Trust, which has a substantial footprint in the Los Angeles area with nine properties, continues to perform well. These assets contributed approximately $41.5 million in annual hotel EBITDA for both 2022 and 2023.
This performance is particularly notable as it accounts for around 20% of the company’s urban hotel EBITDA and approximately 12% of its overall hotel portfolio EBITDA. InvestingPro data reveals the company maintains a GOOD overall financial health score, with revenue growing at 3.15% over the last twelve months.
The company’s Los Angeles portfolio is diversified across three key areas, with two properties in Santa Monica, including the recently transformed Hyatt Centric Delfina and Viceroy Santa Monica. Additionally, there are two assets in the West Beverly Hills region, Hotel Palomar and the W Los Angeles, and five in West Hollywood comprising Montrose at Beverly Hills, Chamberlain West Hollywood, Mondrian Los Angeles, Hotel Ziggy, and Le Parc at Melrose (LON:MRON).
As of now, these properties are operational and have not suffered significant damage. They are poised to benefit from increased business due to the need for short-term lodging by displaced residents, first responders, insurance adjusters, and others. This uptick in business is expected even though the first quarter is typically a slower season for the market.
In other recent news, PebbleBrook Hotel Trust has experienced several significant developments. The company reported an encouraging increase in revenue per available room (RevPAR), with same-property RevPAR rising by 2.2% and total RevPAR by 2.7%. Out-of-room spending also saw a growth of 3.8%, and the company’s same-property hotel EBITDA reached $110.8 million, surpassing expectations by $8.7 million.
In terms of financial management, PebbleBrook issued $400 million in senior unsecured notes and extended bank term loans to 2029, ensuring no significant debt maturities until December 2026. The company also underwent a brand conversion, with the Delfina Santa Monica Hotel being rebranded to Hyatt Centric, a process expected to be completed by Q1 2025 with a $16 million refresh.
Two analyst firms, Stifel and Compass Point, have upgraded PebbleBrook’s stock rating from ’Hold’ and ’Neutral’ to ’Buy’, respectively. Stifel increased its price target for the company’s shares to $15.00, while Compass Point maintained a steady price target of $17.00.
These upgrades reflect the firms’ belief in PebbleBrook’s potential for recovery and growth, despite the company’s lag behind its sector peers.
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