On Thursday, JPMorgan (NYSE:JPM) made a slight adjustment to the price target for Hyatt Hotels Corporation (NYSE:H), bringing it down to $163 from the previous $164 while reiterating an Overweight rating on the stock. The firm's analysis highlighted Hyatt's positive fee growth trajectory and its shift towards an asset-light lodging model. According to the firm, more than 80% of Hyatt's business now adheres to this model, with expectations to reach 85% by 2025.
The firm appreciates Hyatt's strategy of acquiring small brands to offset the EBITDA lost from recently sold properties. These acquisitions are seen as beneficial due to Hyatt's ability to leverage its scale. JPMorgan also noted that Hyatt's current trading levels, with enterprise value to EBITDA (EV/EBITDA) multiples of 14.6x for 2025 and 13.2x for 2026, are at a discount compared to peers Marriott International (NASDAQ:MAR) and Hilton Worldwide Holdings (NYSE:HLT), which the firm believes is unjustifiably wide.
The adjustment to the price target is attributed to minor changes in net debt estimates. Despite the $1 decrease, JPMorgan's valuation approach remains based on sum-of-the-parts analysis, which suggests Hyatt could trade at 15.3x its estimated 2025 EV/EBITDA by the end of next year. The firm's stance indicates a continued positive outlook on Hyatt's financial prospects and market position.
In other recent news, Hyatt Hotels Corporation has made significant strides in its strategic and financial landscape. The company announced a strategic joint venture with Grupo Piñero to manage and own Bahia Principe-branded hotels and resorts.
The venture will expand Hyatt's all-inclusive room portfolio by approximately 30% and includes 23 resorts totaling over 12,000 rooms. In addition, Hyatt has repurchased $250 million worth of Class B shares from the Margo and Tom Pritzker Foundation, leaving around $982 million under its current repurchase authorization.
Hyatt's stock has seen various adjustments from financial firms. CFRA downgraded the company's stock from Buy to Hold, albeit with a raised target price of $155, citing recent stock performance and valuation concerns. Baird adjusted Hyatt's stock target to $157 while maintaining a Neutral rating. Other firms including Goldman Sachs (NYSE:GS), Jefferies, Stifel, and JPMorgan offered assessments, with price targets ranging from $151 to $165.
In terms of earnings, CFRA maintained its earnings per share (EPS) estimates for Hyatt at $4.04 for 2024 and $4.55 for 2025. Citi set its third-quarter 2024 EPS estimate for Hyatt at $0.95, raised the full-year 2024 EPS estimate to $4.37, but adjusted the fiscal year 2025 EPS estimate downwards to $4.04.
InvestingPro Insights
To complement JPMorgan's analysis, InvestingPro data offers additional insights into Hyatt Hotels Corporation's financial health. The company's market capitalization stands at $14.62 billion, with a P/E ratio of 15.39, suggesting a relatively moderate valuation compared to its earnings. Hyatt's impressive gross profit margin of 68.06% for the last twelve months as of Q2 2024 aligns with JPMorgan's positive outlook on the company's fee growth trajectory.
InvestingPro Tips highlight that Hyatt has been aggressively buying back shares, which could be seen as a sign of management's confidence in the company's future prospects. This aligns with the firm's strategy of moving towards an asset-light model and acquiring small brands, as mentioned in the JPMorgan analysis.
Another relevant InvestingPro Tip notes that Hyatt operates with a moderate level of debt, which could provide flexibility for future acquisitions and growth initiatives. This moderate debt level may also contribute to the company's ability to leverage its scale when integrating new brand acquisitions, as pointed out by JPMorgan.
For investors seeking a more comprehensive analysis, InvestingPro offers 10 additional tips that could provide further insights into Hyatt's financial position and market performance.
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