On Friday, HSBC adjusted its stance on Hyatt Hotels Corporation (NYSE:H), downgrading the stock from Buy to Hold and reducing the price target to $156 from the previous $169. The revision reflects a moderated growth outlook despite the company's solid performance over the past year.
The new price target suggests a modest 7.3% potential upside, anchored on a 2025 estimated enterprise value to EBITDA multiple of 18.0 times, which is consistent with the three-year average and includes stock-based compensation. The target also corresponds to a price-to-earnings ratio of 38.0 times, aligning closely with current levels.
Hyatt's stock has experienced a notable rise over the last year, climbing approximately 42%, which has outpaced the S&P 500 Consumer Discretionary Index by about 22%. This growth is attributed to Hyatt's successful strategy of selling assets to unlock capital, which facilitated a transition to a more resilient, fee-driven business model.
Despite this strong performance, HSBC believes that Hyatt's shares are now fairly valued, trading at a 2025 estimated EV/EBITDA multiple that represents a 19.2% premium compared to its peers, based on their three-year compound annual growth rate.
The analyst highlighted potential catalysts for Hyatt that could still drive the stock's performance. These include higher-than-anticipated organic net unit growth, a return to historical levels of portfolio attrition, meaningful value accretion from portfolio acquisitions or dispositions, and a demand rebound in the US and China markets.
In other recent news, Hyatt Hotels Corporation has been the subject of several significant developments. The company has made strides in its financial and strategic landscape, most notably through a joint venture with Grupo Piñero. This venture will expand Hyatt's all-inclusive room portfolio by approximately 30%, including 23 resorts totaling over 12,000 rooms.
Additionally, Hyatt has repurchased $250 million worth of Class B shares from the Margo and Tom Pritzker Foundation, leaving approximately $982 million under its current repurchase authorization.
Analysts have made several adjustments to Hyatt's stock target recently. JPMorgan cut the target to $163 from $164, while CFRA downgraded the company's stock from Buy to Hold, albeit with a raised target price of $155. Baird adjusted Hyatt's stock target to $157 while maintaining a Neutral rating.
Other firms, including Goldman Sachs, Jefferies, Stifel, and Citi, have also provided assessments, with price targets ranging from $151 to $165.
In terms of earnings, CFRA maintained its earnings per share (EPS) estimates for Hyatt at $4.04 for 2024 and $4.55 for 2025. Citi set its third-quarter 2024 EPS estimate for Hyatt at $0.95, raised the full-year 2024 EPS estimate to $4.37, but adjusted the fiscal year 2025 EPS estimate downwards to $4.04.
These are the recent developments in Hyatt's strategic and financial landscape.
InvestingPro Insights
Adding to HSBC's analysis, recent data from InvestingPro provides further context on Hyatt Hotels Corporation's financial position. The company's market capitalization stands at $14.59 billion, with a P/E ratio of 11.92, indicating a potentially attractive valuation relative to earnings. This aligns with one of the InvestingPro Tips, which notes that Hyatt is "Trading at a low P/E ratio relative to near-term earnings growth."
InvestingPro data also reveals impressive gross profit margins of 68.06% for the last twelve months as of Q2 2024, supporting another InvestingPro Tip highlighting Hyatt's "Impressive gross profit margins." This strong profitability metric underscores the company's efficient operations and pricing power within the hospitality industry.
However, investors should note that Hyatt's stock price movements are quite volatile, as indicated by another InvestingPro Tip. This volatility is reflected in the recent price performance, with a 1-week total return of -5.89% and a 1-year total return of 40.46%, showcasing the potential for significant short-term fluctuations despite overall positive performance.
For readers interested in a more comprehensive analysis, InvestingPro offers 11 additional tips for Hyatt Hotels Corporation, providing a deeper understanding of the company's financial health and market position.
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