On Wednesday, Truist Securities reaffirmed its positive stance on Marriott Vacations Worldwide (NYSE:VAC), maintaining a Buy rating and a $142.00 price target. The firm's analyst highlighted the stock's underperformance relative to its peers and the broader market. According to InvestingPro data, VAC currently trades at a P/E ratio of 14.8x with a healthy gross profit margin of 57.6%.
InvestingPro analysis indicates the stock is fairly valued at current levels. Over the past two years, Marriott Vacations' total return was approximately -33%, in stark contrast to the S&P 500's +50% and gains of +25-95% for hotel corporations. Competitors Hilton Grand Vacations (HGV) and Travel + Leisure Co. (TNL) experienced flat and +40% returns, respectively.
Truist Securities believes that Marriott Vacations has significant potential for upside in 2025, considering it a stock with noteworthy prospects for growth. The firm is not labeling Marriott Vacations as their top pick but suggests it could notably outperform if the company avoids operational issues and executes its strategy effectively.
The case for Marriott Vacations' potential outperformance in 2025 is supported by a conservative scenario laid out by Truist Securities, which anticipates at least a 15% total return. A more optimistic earnings scenario predicts an 8% compound annual growth rate (CAGR) in EBITDA from 2024 to 2026, based on what the firm believes are currently depressed earnings.
Additionally, with the expectation of approximately $250 million in free cash flow generated in 2025, Truist Securities sees a possible price target of $108, which would translate to a return greater than 30%, without assuming any valuation multiple expansion.
The analyst's comments reflect a belief in the stock's recovery potential, suggesting that Marriott Vacations could see material gains in the coming year if the company's financial performance meets expectations. The reiterated Buy rating and $142.00 price target signal confidence in the company's ability to bounce back from its recent underperformance.
InvestingPro reveals that analysts maintain a moderate buy consensus, with price targets ranging from $80 to $142. For deeper insights into VAC's valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
In other recent news, Marriott Vacations Worldwide has reported a robust Q3 performance, with a 5% year-over-year increase in contract sales and nearly 90% resort occupancy. The company's earnings were bolstered by strategic initiatives such as a first-time buyer financing promotion and the opening of a new resort in Waikiki, expected to increase annual contract sales by $30 million to $50 million. Despite challenges from the Maui wildfires, Marriott Vacations demonstrated resilience, with CEO John Geller projecting low single-digit maintenance fee increases for 2025.
Financially, Marriott Vacations reported $231 million in adjusted EBITDA for the Vacation Ownership segment and over $900 million in liquidity. However, the Exchange and Third-Party Management segment experienced a $7 million decline in adjusted EBITDA, primarily due to lower profits from Aqua-Aston after the Maui wildfires.
In recent developments, Barclays (LON:BARC) upgraded shares of Marriott Vacations, citing several factors behind the positive outlook for the timeshare company heading into 2025. In contrast, the company's shares have underperformed its peers, Travel + Leisure Co. and Hilton Grand Vacations Inc (NYSE:HGV)., by a significant margin since the end of 2019. Stifel, an investment firm, recently reiterated its Buy rating on Marriott Vacations and increased its price target from $102.00 to $112.00.
Marriott Vacations also announced a 4% hike in its quarterly cash dividend to $0.79 per share of common stock, maintaining payments for 11 years straight, with a current yield of 3.12%. Additionally, the company promoted Scott Weisz to Executive Vice President, Strategic Business Operations, and plans to open a new Hyatt Vacation Club resort in Orlando, potentially yielding an additional $50 million to $100 million annually by 2026.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.