Investing.com -- In its 2025 European hotel stock forecast, dated Wednesday, Morgan Stanley (NYSE:MS) analysts recommend investing in four companies, while cautioning against three others due to valuation concerns or operational challenges.
Accor (EPA:ACCP) leads the list of preferred stocks, with analysts citing its strong growth potential driven by strong demand and accelerating net unit expansion.
The French hospitality giant’s exposure to high-performing markets, such as Europe, positions it well for continued outperformance in revenue per available room.
Additionally, Accor’s strategy of returning cash to shareholders through buybacks and dividends is seen as a significant positive.
The company’s undervaluation compared to peers provides further upside, with Morgan Stanley raising its price target to €55 from €49.
The potential sale of its stake in AccorInvest adds another layer of strategic optionality that could enhance shareholder returns.
Flutter Entertainment also emerges as a top pick, with analysts optimistic about its leading position in the online gambling industry.
The company is particularly well-placed in the lucrative US market, where its FanDuel brand continues to dominate.
Flutter's ability to generate strong free cash flow, coupled with the potential for inclusion in major stock indices, bolsters its investment case.
Analysts note that the company’s valuation remains reasonable given its growth trajectory, raising the price target to $320.
Sodexo (EPA:EXHO), a leader in the catering outsourcing space, is another stock favored by Morgan Stanley.
The company benefits from strong trends in outsourcing and solid performance in the US market, aided by initiatives to improve retention and optimize operations.
Its 4% dividend yield and record valuation gap to peers make it an attractive investment. Analysts expect continued growth and margin improvements, solidifying its “overweight” rating.
The fourth recommendation, Lottomatica, is positioned to capitalize on growth in the Italian online gaming market.
The company’s focus and regulatory tailwinds provide a supportive environment for expansion. With a differentiated strategy and capable management, Lottomatica remains a standout in its segment.
On the other hand, Morgan Stanley advises caution on InterContinental Hotels Group, citing concerns about its valuation despite its strong asset-light model.
While the company enjoys margin growth and operational efficiency, its stock appears fully valued compared to peers, leading to a downgrade to “underweight”.
Carnival Corporation (LON:CCL) also falls into the avoid category. The cruise line operator’s asset-heavy model poses risks in a potentially weakening demand environment.
Analysts note that while cruise demand has been strong, oversupply and cost pressures could hurt pricing.
Coupled with a leveraged balance sheet, these challenges make the risk-reward profile of Carnival (NYSE:CCL) less appealing.
Scandic Hotels rounds out the list of stocks to avoid. The company faces headwinds from sluggish RevPAR growth in the Nordics and cost inflation.
Its leased business model adds further operational gearing, making it less resilient to market fluctuations.
Despite its strong balance sheet, analysts view its valuation as unattractive, prompting an “underweight” rating.