On Friday, KeyBanc Capital Markets reiterated its Overweight rating on Xenia Hotels & Resorts (NYSE:XHR), maintaining a $17.00 price target for the company's shares.
The firm's positive stance follows a property tour of the Hyatt Regency Grand Cypress in Orlando, where Xenia's management highlighted the hotel's significant contribution to the company's EBITDA and the potential for further growth.
Management at Xenia Hotels & Resorts showcased the Hyatt Regency Grand Cypress, its largest EBITDA contributor, accounting for 13% in 2023. They pointed out the upside opportunities that could arise from the recent expansion of meeting space and other renovations.
KeyBanc's attention was drawn to several key growth drivers for Xenia, including the ongoing renovation and rebranding at the Hyatt Regency Scottsdale, the recovery of its Northern California hotels, which represent 9% of the 2023 hotel EBITDA, and the progress towards stabilization at newly acquired properties such as W Nashville and Hyatt Regency Portland Convention Center.
Additionally, Xenia's management discussed the potential benefits from various capital expenditure projects. Despite the uncertainty surrounding the timeframe for achieving the projected adjusted EBITDA of $343 million—a 36% increase from 2023 levels—KeyBanc noted the multiple sources of growth that present unique opportunities within the company's portfolio.
KeyBanc also highlighted that the disruptions from renovations are nearing an end and should start benefiting the company in the second half of 2024 and into 2025, marking a shift from headwinds to tailwinds.
The firm believes that while a broad-based reacceleration in hotel fundamentals is not expected, Xenia Hotels & Resorts offers an attractive investment opportunity within the lodging REIT sector due to its potential for growth and appealing valuation relative to its peers.
InvestingPro Insights
Adding to KeyBanc Capital Markets' optimistic outlook on Xenia Hotels & Resorts, InvestingPro data reveals further insights into the company's financial health and market performance. With a market capitalization of $1.52 billion and a high earnings multiple, Xenia is trading at a P/E ratio of 70.5, which adjusts to 78.34 when considering the last twelve months as of Q1 2024. Despite this high earnings valuation, the company's revenue valuation multiple is low, indicating potential for market re-rating.
InvestingPro Tips suggest that Xenia's management has been focused on shareholder returns, as evidenced by aggressive share buybacks and a high shareholder yield. Additionally, the company's liquid assets surpass its short-term obligations, providing financial stability. Furthermore, analysts are confident in Xenia's profitability, predicting the company will maintain its profit streak this year, following a profitable last twelve months.
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