By Sam Boughedda
Barclays cut Hyatt Hotels (NYSE:H) to Equal-Weight from Overweight, cutting the firm's price target on the stock to $125 from $130, and upgraded Hilton Worldwide Holdings Inc (NYSE:HLT) to Overweight from Equal Weight, raising the price target to $168 from $151 in a note to clients Thursday.
Analysts told investors in a note that Hyatt shares have "meaningfully outperformed YTD" on outsized operating leverage and over-indexed exposure to leisure, group, and China.
"Impressive share outperformance has rendered relative valuation no longer attractive and somewhat full on an absolute basis," the analysts wrote about Hyatt. "Key overexposures like U.S. group business and China are now mostly priced in, in our view."
They added that Hyatt's ALG business, which was the primary driver of upside vs. consensus over the last four quarters, is "facing tough comparisons," and so growth is "likely to decelerate meaningfully."
The analysts consider Hilton to be "the best-in-class franchise growth business."
"We think HLT's outstanding net unit growth (NUG) will become more dear to investors," the analysts wrote. "NUG should reaccelerate faster than peers, based on pipeline chain-scale positioning and a material boost from layering in early success with its recently launched Spark conversion brand."
"Relative valuation, which we see as a <0.5x EV/EBITDA premium to MAR, under-appreciates sustainable higher unit growth, in our view. To be clear, HLT's absolute valuation appears full as well, so for us this is more of a relative long preference."