On Monday, BofA Securities adjusted its outlook on Atour Lifestyle Holdings (NASDAQ: ATAT), reducing the stock price target to $23.70 from the previous $25.00, while still recommending the stock as a Buy. The revision followed Atour's stock decline of 6% last Tuesday, after the company unveiled its fourth-quarter results for 2023 and provided its fiscal year 2024 guidance.
The price target adjustment was attributed to the company's guidance for flat year-over-year revenue per available room (RevPAR) growth for FY24, which did not meet market expectations of a low single-digit (LSD) increase.
This forecast came on the heels of a similar guidance by a competitor the previous week. The analyst noted that the anticipated RevPAR performance was being impacted by factors such as the ramp-up time for new hotel openings and a shift in the mix of hotels towards a brand with lower RevPAR.
Specifically, the company has accelerated its expansion, opening 181 new hotels in the second half of 2023, up from 108 in the first half. These new properties typically take six months to reach maturity. Additionally, there has been an increased proportion of openings under the Atour Light brand, a mid-scale offering that commands lower RevPAR compared to Atour's core upper midscale brand.
The analyst projects that Atour's RevPAR will see a low single-digit year-over-year decline in the first quarter of 2024. This is partly due to a high comparison base from last year, which was boosted by a surge in travel demand following the easing of restrictions.
InvestingPro Insights
As Atour Lifestyle Holdings (NASDAQ: ATAT) adapts to the evolving hospitality landscape, investors may find the latest financial metrics and expert analysis from InvestingPro invaluable. With a market capitalization of $2.47 billion, Atour is trading at a P/E ratio of 24.28, reflecting investor expectations of future earnings.
The company's impressive revenue growth over the last twelve months, at 106.19%, underscores its significant expansion efforts and the market's response to its diversified hotel offerings.
InvestingPro Tips highlight Atour's strategic financial positioning, noting that the company holds more cash than debt and has liquid assets that exceed short-term obligations, indicating a robust balance sheet.
Moreover, Atour is recognized as a prominent player in the Hotels, Restaurants & Leisure industry, with analysts forecasting profitability for the current year. These factors, coupled with the company's ability to comfortably cover its interest payments with cash flows, provide a compelling narrative for potential investors.
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