On Friday, Barclays (LON:BARC) upgraded shares of Marriott Vacations Worldwide (NYSE:VAC), changing its rating from Equalweight to Overweight and increasing its price target to $116 from $97. The firm cited several factors behind the positive outlook for the timeshare company heading into 2025. Currently trading at $94.85 with a market capitalization of $3.31 billion, VAC offers a dividend yield of 3.33% and maintains a P/E ratio of 16.69.
According to Barclays, Marriott Vacations offers a compelling opportunity for investors seeking exposure to the potential upside in the timeshare industry. The company is viewed favorably due to its high-net-worth consumer base, which is expected to show a strong correlation with the broader rally in risk assets. InvestingPro data reveals the company's strong financial position, with a healthy current ratio of 4.56, indicating robust liquidity.
The analyst highlighted the company's recovery potential, pointing to the positive impacts expected from its operations in Maui, which are set to become a tailwind next year. Other factors contributing to a robust recovery include the lapping of the Abound transition, continued benefits from promotions introduced in August, and the openings of new resorts in Waikiki and a sales center in Bali.
Barclays also noted that Marriott Vacations' shares have underperformed its peers, Travel + Leisure Co. (TNL) and Hilton Grand Vacations Inc . (NYSE:HGV), by a significant margin since the end of 2019 and over the past two years. This underperformance has eliminated the valuation premium that Marriott Vacations once held, with the stock now trading below TNL. The analyst believes this is unwarranted and anticipates a reversion to the mean over time.
According to InvestingPro analysis, the stock appears fairly valued at current levels, with a beta of 1.84 indicating higher volatility than the market. For deeper insights into VAC's valuation metrics and growth potential, 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.
Stifel, an investment firm, recently reiterated its Buy rating on Marriott Vacations and increased its price target from $102.00 to $112.00. The firm also revised its earnings per share estimates for the company, projecting an increase in the 2025 and 2026 estimates.
In terms of personnel changes, the company promoted Scott Weisz to Executive Vice President, Strategic Business Operations. Looking ahead, Marriott Vacations plans to open a new Hyatt Vacation Club resort in Orlando and implement initiatives to improve operational efficiencies, potentially yielding an additional $50 million to $100 million annually by 2026.
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