Truist Securities has revised its price target for Hilton Grand Vacations (NYSE: NYSE:HGV), reducing it to $52 from the previous $71, while still recommending the stock as a Buy.
The adjustment follows a downward revision in the company's projected financials, with the 2024 Adjusted EBITDA forecast being lowered to $1,098 million from $1,244 million and the 2024 EPS estimate being adjusted to $4.49 from $5.00.
Similarly, the 2025 Adjusted EBITDA projection has been decreased to $1,168 million from $1,333 million, with the EPS forecast for the same year now sitting at $2.84, down from $4.12.
The new price target is derived from a blended 8.6x multiple applied to the firm's 2025 estimated EBITDA, a slight decrease from the previously utilized 8.9x multiple. This valuation reflects a more conservative stance on the part of Truist Securities in light of the updated earnings projections.
Truist Securities has highlighted that Hilton Grand Vacations' current trading multiples are 6.0x for the 2024 EBITDA estimates and 7.1x for the 2025 estimates. The revised price target and multiples suggest a more cautious outlook on the company's valuation, despite the maintained Buy rating.
In other recent news, Hilton Grand Vacations has unveiled its earnings for the second quarter of 2024. The company reported contract sales of $757 million and an EBITDA of $270 million, indicating a margin of 22%.
Despite a robust occupancy rate of 83% and positive forward demand indicators, a decrease in new buyer spending led HGV to revise its annual guidance. The company also noted organizational changes to boost sales and marketing efforts.
Hilton Grand Vacations highlighted the progression of Diamond and Bluegreen integrations, with 70% of Diamond rebranding complete. The company also reported a real estate sales and marketing expense of $375 million and financing business revenue of $102 million. However, challenges in staffing and recruiting have affected tour slot availability, and there has been an increase in defaults and delinquency rates.
Looking to the future, Hilton Grand Vacations plans to address challenges in the customer base and adjust product offerings. The company anticipates mid-single digit maintenance fee growth for the next year and intends to return significant capital to shareholders.
InvestingPro Insights
As we evaluate the revised price target for Hilton Grand Vacations by Truist Securities, it's worth considering additional insights from InvestingPro. Analysts remain optimistic about the company's sales growth in the current year, which aligns with the maintained Buy rating despite the lowered price target. Moreover, management's strategy of aggressively buying back shares could signal confidence in the company's valuation and future prospects.
InvestingPro data further reveals a market capitalization of $3.82 billion and a price-to-earnings (P/E) ratio of 25.21, which adjusts to a more attractive 11.89 when looking at the last twelve months as of Q2 2024. This adjusted P/E ratio may present a more compelling picture of the company's valuation. Additionally, the company's liquid assets exceed short-term obligations, providing financial stability and potentially mitigating risks for investors.
It is also notable that Hilton Grand Vacations has been profitable over the last twelve months, a reassuring sign for potential investors. For those interested in further insights, there are additional InvestingPro Tips available at https://www.investing.com/pro/HGV, which could provide a deeper understanding of the company's financial health and market position.
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