On Tuesday, Mizuho Securities adjusted its price target for Hyatt Hotels Corporation (NYSE:H), reducing it slightly from $195.00 to $197.00, while still recommending the stock as a Buy.
The investment firm's decision is based on a sum-of-the-parts (SOP) analysis of Hyatt's projected 2026 EBITDA, including three years of free cash flow (FCF) generation.
The analyst at Mizuho assigned an 11x multiple to Hyatt's Owned business segment, noting that this valuation is conservative compared to recent hotel mergers and acquisitions, which have seen multiples ranging from approximately 13x to 17x. This valuation reflects a cautious stance in light of the premium prices observed in the hotel industry's transactional market.
For the pro-forma Management and Franchise (M&F) business of Hyatt, Mizuho has applied a 17x multiple, aligning it with peers such as Hilton (HLT), due to comparable and potentially faster unit growth. This suggests that the firm sees Hyatt's M&F segment performing strongly and justifies the valuation in line with its industry counterparts.
In addition, the Destination business of Hyatt has been given a 9x multiple, which remains unchanged from previous assessments. According to the firm's analysis, this particular segment of Hyatt's operations seems to have a steady valuation.
Mizuho's analysis and the subsequent price target adjustment reflect a detailed review of Hyatt's various business segments and their potential future performance. The maintained Buy rating indicates the firm's continued confidence in the stock's prospects despite the minor adjustment in the price target.
InvestingPro Insights
With the recent analysis by Mizuho Securities on Hyatt Hotels Corporation (NYSE:H), investors may find additional context through InvestingPro data and tips. The company's market capitalization stands at a robust $14.84 billion, and it has been operating with an impressive gross profit margin of 66.91% over the last twelve months as of Q4 2023. This high margin is indicative of Hyatt's efficient operations and could be a contributing factor to the firm's confidence in the stock.
Moreover, Hyatt has experienced a substantial price uptick of 44.11% over the last six months, aligning with the positive outlook shared by Mizuho. This performance is further supported by an InvestingPro Tip that analysts predict the company will be profitable this year. The combination of strong gross profit margins and anticipated profitability may provide a compelling narrative for investors considering Hyatt's stock.
Investors seeking a more comprehensive understanding of Hyatt's financial health and future prospects can access additional InvestingPro Tips, with a total of 12 listed on the platform. For those looking to delve deeper into these insights, they can take advantage of a special offer using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Lastly, it's worth noting that Hyatt is trading at a high earnings multiple, with a P/E ratio of 70.06 and an adjusted P/E ratio for the last twelve months of 86.77. While this may suggest a premium valuation, the company's solid fundamentals and growth prospects could justify these figures, especially in light of the positive analyst predictions and robust profit margins.
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