Tuesday, Mizuho began covering Marriott International (NASDAQ: NASDAQ:MAR) with a Neutral rating and a price target of $263. The firm's analysis suggests that while there may be potential upside in near-term net unit growth estimates for the hotel company, concerns linger about a possible deceleration in longer-term trends.
Additionally, Marriott's greater exposure to the leisure customer segment could underperform when compared to Group and Business Transient segments, which are currently in recovery mode.
The Neutral stance also reflects a valuation perspective, with Marriott's stock trading at approximately 16 times its forward two-year EBITDA. This valuation is at the upper end of its historical range, which typically spans from 12 to 16 times EBITDA. Mizuho's position is that at the current levels, the stock presents a balanced risk/reward scenario.
The firm's price target of $263 indicates a level at which the analysts believe the stock would be fairly valued, considering the current market conditions and the company's financial outlook. The target is based on Marriott's current business dynamics and market positioning, which, according to Mizuho, do not warrant a more bullish stance at this time.
Mizuho's coverage initiation follows a period of recovery in the hospitality sector, with Marriott being one of the prominent players. The company's performance and stock valuation are being closely monitored by investors as the industry rebounds from the impacts of the global health crisis.
In summary, Mizuho's neutral outlook on Marriott is based on a combination of positive near-term growth prospects, concerns about the long-term growth trajectory, the company's exposure to leisure travel, and current valuation metrics.
InvestingPro Insights
Marriott International's (NASDAQ: MAR) recent financial performance and market valuation offer several key insights. According to InvestingPro data, the company has a market capitalization of 72.98 billion USD, with a P/E ratio that has adjusted to 23.31 over the last twelve months as of Q4 2023. This valuation is supported by a PEG ratio of 0.59, which may indicate potential for growth relative to earnings. Additionally, Marriott's revenue growth was 17.63% over the last twelve months, showcasing a robust increase, while the gross profit margin stood impressively at 81.51%, reflecting efficient cost management and strong pricing power.
From the perspective of InvestingPro Tips, Marriott's management has been actively buying back shares, which can be a sign of confidence in the company's future and often provides support for the stock price. Despite some analysts revising their earnings downwards for the upcoming period, the company is still trading at a low P/E ratio relative to near-term earnings growth. This could suggest that the stock is undervalued compared to its earnings potential. Moreover, Marriott has been profitable over the last twelve months, with a strong return over the last year, which might appeal to investors seeking companies with a solid track record of performance.
For those interested in a deeper analysis, InvestingPro offers additional insights and metrics on Marriott International. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription and gain access to numerous InvestingPro Tips that can further inform your investment decisions.
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