On Thursday, CFRA adjusted its stance on Hyatt Hotels Corporation (NYSE:H), shifting the rating from Buy to Hold. The firm also slightly increased the price target to $155 from the previous $153. The revision follows Hyatt's recent stock performance, which has prompted a reassessment of its valuation.
The analyst at CFRA maintained earnings per share (EPS) estimates for Hyatt at $4.04 for the year 2024 and $4.55 for 2025. The new price target is based on an enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple of 15.0 times. This multiple sits at the upper end of Hyatt's historical trading range, which spans from 7 to 15 times.
The decision to downgrade Hyatt's stock rating was influenced by the stock's performance leading up to the announcement. The analyst cited valuation concerns as the primary reason for the change in position, indicating that the recent increase in stock price may not leave much room for additional growth under the current financial projections.
Hyatt Hotels is expected to release its earnings report on October 31. Investors and analysts will be watching closely to see if the company's financial results align with CFRA's projections and to gauge the stock's future trajectory following the earnings announcement.
The slight increase in the price target from $153 to $155, despite the downgrade, suggests a modest optimism about the company's value, albeit tempered by the recent price appreciation. The Hold rating indicates a neutral perspective on the stock, advising investors to maintain their positions without making additional purchases at this time.
In other recent news, Hyatt Hotels Corporation has been the focus of several significant developments. The company recently announced a substantial share repurchase of $250 million worth of Class B shares from the Margo and Tom Pritzker Foundation, a move that aligns with its ongoing capital management strategy. Upon completion, approximately $982 million will remain under Hyatt's current repurchase authorization.
In terms of analyst coverage, Baird has adjusted Hyatt's stock target to $157 from $158 while maintaining a Neutral rating. Other firms, including Goldman Sachs, Jefferies, Stifel, and JPMorgan, have also offered assessments, with price targets ranging from $151 to $165.
Hyatt's financial performance has been under scrutiny, with Citi setting its third-quarter 2024 earnings per share (EPS) estimate at $0.95, and raising the full-year 2024 EPS estimate to $4.37. However, the fiscal year 2025 EPS estimate has been adjusted downwards to $4.04.
In addition to these financial developments, Hyatt has decided to implement the Oracle (NYSE:ORCL) OPERA Cloud platform across its global hotel portfolio, aiming to standardize operations and enhance data management. This move aligns with Hyatt's strategic transition towards an asset-light business model, further emphasized by the sale of the Orlando Hyatt Regency and the acquisition of Standard International.
InvestingPro Insights
To complement CFRA's analysis, InvestingPro data offers additional insights into Hyatt Hotels Corporation's financial position. The company's market capitalization stands at $15.38 billion, with a P/E ratio of 16.23. Hyatt's revenue for the last twelve months as of Q2 2024 was $6.57 billion, with a gross profit margin of 68.06%, highlighting the company's impressive profitability in the hospitality sector.
InvestingPro Tips reveal that Hyatt has been aggressively buying back shares, which could be seen as a positive signal for investor confidence. The company also boasts impressive gross profit margins, aligning with the reported 68.06% figure. These factors may contribute to the analyst's decision to maintain a relatively high price target despite the downgrade.
It's worth noting that Hyatt's stock price movements are quite volatile, which investors should consider in light of CFRA's valuation concerns. For those seeking a more comprehensive analysis, InvestingPro offers 8 additional tips that could provide further context to Hyatt's financial health and market position.
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