On Friday, Citi reaffirmed its positive stance on H World Group Ltd. (NASDAQ: HTHT), maintaining a Buy rating and a $60.00 price target for the company's shares. The firm's analyst highlighted the conservative nature of H World's full-year store growth guidance, suggesting there is potential for higher than expected store openings and market share gains. This assessment follows a recent visit to a Ji Hotel 5.0 in Shanghai, part of H World's portfolio.
The analyst noted that while there is a short-term overhang on revenue per available room (RevPAR) due to a high comparison base and a sluggish recovery in business travel demand, this is partly mitigated by the company's product upgrades and an increase in B2B direct sales.
The new version of Ji Hotel exemplifies H World's commitment to service excellence and customer satisfaction, as well as cost efficiency improvements, which are expected to continue supporting its leadership and competitiveness in the midscale hotel segment.
H World's recent share price weakness, attributed to short-term fluctuations in RevPAR, was deemed excessive by the analyst. The current share price is seen as an attractive entry point for investors, given the company's ongoing expansion and the introduction of the upgraded Ji Hotel service.
The analyst's comments come after a consumer tour and a meeting with H World's management, where the pace of expansion and new signings in the first quarter of 2024 were observed. Despite the current challenges, the analyst's outlook for H World remains optimistic, with expectations for the company to outperform its guidance and strengthen its market position.
InvestingPro Insights
Recent data from InvestingPro underscores the financial dynamics of H World Group Ltd. (NASDAQ: HTHT) in a way that complements the analyst's positive outlook. With a robust market capitalization of $11.31 billion and a forward P/E ratio of 22.49, the company is valued favorably by the market, reflecting its potential for growth.
The revenue growth of 44.82% over the last twelve months as of Q1 2024 indicates a strong upward trajectory, which is further highlighted by a significant 192.91% EBITDA growth during the same period. This financial health is further corroborated by a high shareholder yield, as noted in one of the InvestingPro Tips, which aligns with the analyst's assessment of H World's conservative growth guidance and potential for market share gains.
InvestingPro Tips also reveal that management has been actively buying back shares, a vote of confidence in the company's future prospects. Moreover, the company's stock has experienced a notable decline over the past week, presenting what some investors might consider a buying opportunity in light of the company's strong fundamentals and the analyst's optimistic target price of $60.00.
For investors seeking more comprehensive analysis, there are an additional 10 InvestingPro Tips available, which can provide deeper insights into H World's financials and market position. To access these insights, investors can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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