On Monday, Truist Securities adjusted its price target for PebbleBrook Hotel Trust (NYSE:PEB), a real estate investment trust, moving it down to $14.00 from the previous target of $15.00. The firm has chosen to maintain a Hold rating on the stock.
The adjustment comes in the wake of revised earnings estimates by Truist Securities. The firm has increased its 2024 estimated Adjusted EBITDAre for PebbleBrook to $355 million, up from $351 million, and its Adjusted Funds From Operations (AFFO) per share forecast to $1.64 from $1.59. Looking ahead to 2025, the firm now expects Adjusted EBITDAre to reach $361 million, a slight increase from the previous estimate of $359 million, with AFFO per share rising to $1.72 from $1.66.
The new price target of $14 is based on a 13.0x multiple applied to the firm's 2025 EBITDA estimate, which represents a decrease of 50 basis points from the previous valuation multiple.
Truist Securities cites several challenges facing PebbleBrook, which influenced the decision to lower the price target. These challenges include persistent market weakness in San Francisco, anticipated labor cost increases starting in 2025, and uncertainties regarding the EBITDA impact from LaPlaya/Naples.
Additionally, the recent hurricanes in Florida have created near-term uncertainty about future property insurance costs, further contributing to the firm's cautious outlook on the stock.
In other recent news, Pebblebrook Hotel (NYSE:PEB) Trust reported strong Q2 results, exceeding expectations with increased revenue per available room (RevPAR) and hotel earnings before interest, taxes, depreciation, and amortization (EBITDA).
The company also raised its 2024 outlook for key financial metrics, despite a cautious outlook due to a slowing average daily rate and economic deceleration. In terms of recent developments, Pebblebrook announced a private placement of $400 million in senior notes, primarily aimed at reducing existing unsecured term loans. Additionally, the company has expressed an intention to offer $350 million in senior notes for the same purpose.
On the property front, Pebblebrook's hotels experienced minimal damage from Hurricane Helene, with repair costs expected to be immaterial after insurance. Analyst firm Baird maintains a neutral stance on Pebblebrook, keeping a $15 target, and notes the company's consistent performance. Lastly, with a strong balance sheet, featuring $110 million in cash and no significant debt maturities until October 2025, Pebblebrook is well-positioned for future growth.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on PebbleBrook Hotel Trust's financial position, complementing Truist Securities' analysis. As of the last twelve months ending Q2 2024, PebbleBrook reported revenue of $1.44 billion, with a modest growth of 1.03%. This aligns with the challenges mentioned in the article, particularly the persistent market weakness in San Francisco.
InvestingPro Tips highlight that PebbleBrook is trading at a low revenue valuation multiple, which could be of interest to value-oriented investors. However, it's important to note that the company has not been profitable over the last twelve months, with a negative P/E ratio of -31.84. This unprofitability is consistent with Truist Securities' cautious outlook and the challenges facing the company.
On a positive note, PebbleBrook has maintained dividend payments for 15 consecutive years, demonstrating a commitment to shareholder returns despite the current headwinds. The company's dividend yield stands at 0.32% as of the most recent data.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights beyond those mentioned here. The platform currently lists 7 more tips for PebbleBrook Hotel Trust, providing a deeper understanding of the company's financial health and market position.
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