On Monday, JPMorgan (NYSE:JPM) adjusted its outlook for Park Hotels & Resorts (NYSE:PK) shares, reducing the price target from $17.00 to $16.00 while maintaining a Neutral rating on the stock. The revision reflects updated second quarter through fourth quarter 2024 estimates, accounting for seasonality and adjusted EBITDA changes.
The second quarter forecast anticipates a $11 million decrease from previous estimates, with the third quarter seeing a $6 million increase and the fourth quarter a $5 million rise.
The updated second quarter projections for Park Hotels & Resorts are now set towards the lower end of the company's own +3-5% guidance range for Revenue per Available Room (RevPAR). This adjustment is due to softer leisure demand in Hawaii, mainly attributed to a slower than expected return of Japanese tourists. The second quarter is traditionally the weakest period for the company's group business.
Despite the lower second quarter expectations, the second half of 2024 estimates for Park Hotels have been raised due to strong group momentum, as highlighted during the company's Bonnet Creek tour in May.
Park Hotels completed significant financial transactions in May, including a tender offer for $311 million of its 7.5% 2025 senior notes and the closing of a $550 million offering of 7.0% senior notes due in 2030. These moves have been incorporated into JPMorgan's financial model for the company.
The new year-end 2024 price target of $16 is based on a 10.0x target 2025E EV/EBITDA multiple, which is in line with the valuation of similar lodging real estate investment trusts (REITs). At present, Park Hotels trades at 9.8x/9.6x JPMorgan's estimated 2024/2025 EV/EBITDA, with an implied per key value of approximately $281,000 and a 6.8% dividend yield.
The firm's neutral stance on Park Hotels, as well as other lodging REITs it covers, reflects current market valuations that consider easing margin pressures, modest same-store growth, and improvements from recent capital expenditures.
In other recent news, Park Hotels & Resorts has reported robust Q1 performance, with a 7.8% increase in Revenue per Available Room (RevPAR). The company has also raised its full-year 2024 guidance and plans to invest between $260 to $280 million in strategic property enhancements.
Deutsche Bank (ETR:DBKGn) has maintained its Buy rating on Park Hotels & Resorts, expressing confidence in the company's valuation after a series of property tours and presentations. The firm suggests that Park Hotels & Resorts is on track to meet or exceed current Wall Street forecasts for 2024.
Meanwhile, Evercore ISI has upgraded its rating on Park Hotels & Resorts from In Line to Outperform, citing the stock's attractive valuation and expectations of a supportive dividend yield. The firm also forecasts Park Hotels & Resorts' fiscal year 2024 adjusted funds from operations (AFFO) per share at $2.20.
In other developments, Park Hotels & Resorts has upsized its offering of senior notes to $550 million. The proceeds from this offering, alongside a minimum of $200 million from a new unsecured term loan, are intended for the purchase and redemption of all $650 million of the Issuers' 7.500% Senior Notes due in 2025. These are the recent developments in the company.
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