On Friday, JPMorgan (NYSE:JPM) altered its stance on Host Hotels & Resorts (NASDAQ:HST) stock, shifting from a Neutral to an Underweight rating. The firm also reduced the price target for Host Hotels' shares to $18.00, a decrease from the previous target of $20.00.
The revision reflects concerns over the execution risks associated with the company's newly transformed portfolio, which includes recent acquisitions in Nashville, Oahu, and New York City.
The analyst from JPMorgan indicated that while the company's stock is trading near its historical average in terms of enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), the current price does not fully account for the potential challenges ahead.
Despite this, the analyst's forecasts for Host Hotels' revenue per available room (RevPAR) in 2024 remain unchanged, anticipating a significant increase in the second half of the year to align with the company's full-year guidance range of 2-4%.
The hotel group's properties in Maui are expected to provide a favorable year-over-year comparison in the latter half of 2024, considering the previous year's wildfire impacts. However, the recovery pace in Hawaii has been slower than anticipated, which introduces additional risk to the company's revenue projections.
JPMorgan's revised outlook suggests caution, as the firm believes a more positive view on Host Hotels could be warranted at lower share price levels. The analyst's commentary points to a cautious approach toward the stock, taking into account the execution risks and the slower recovery in key markets such as Hawaii.
In other recent news, Host Hotels & Resorts, a leading lodging real estate investment trust, has been involved in a series of strategic developments. The company recently acquired Turtle Bay Resort on Oahu's North Shore for $680 million, a move that includes a 450-room resort and a 49-acre development-ready land parcel. This acquisition is expected to diversify Host's portfolio within Hawaii and add quality to its collection of properties.
In terms of earnings and revenue, analysts have increased the estimated EBITDA for Host Hotels for the year 2024 to $1,671 million. The Adjusted Funds From Operations (AFFO) per share for 2024 is expected to be $2.03. Meanwhile, Truist Securities revised its stock price target for the company to $23.00, maintaining a Hold rating on the stock.
Host Hotels & Resorts also announced a $600 million green bond offering, the proceeds of which are designated for financing or refinancing a series of eligible green projects. The senior unsecured notes, bearing an interest rate of 5.700%, are due in 2034.
In the first quarter of 2024, the company presented mixed financial results with a year-over-year decline in comparable hotel Revenue per Available Room (RevPAR) but an improvement in total RevPAR. Despite facing challenges such as the Maui wildfires and renovation delays, Host Hotels & Resorts remains optimistic about the future, revising its 2024 outlook to include business interruption proceeds.
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