On Monday, Evercore ISI downgraded Hyatt Hotels Corporation (NYSE:H), moving the company's stock rating from Outperform to In Line. Despite the downgrade, the firm increased the price target for Hyatt to $135.00, up from the previous figure of $125.00.
The rating change comes after a notable uptick in Hyatt's stock value, which has risen by 32% since late October. Additionally, the stock has seen a 44% increase in 2023. However, the company's earnings per share (EPS) and earnings before interest, taxes, depreciation, and amortization (EBITDA) expectations have seen a modest decline over the course of the year. This contrasts with the performance of competitors, as the analyst pointed out that Marriott International (NASDAQ:MAR) and Hilton Worldwide Holdings Inc. (NYSE:HLT) have experienced low double-digit and high single-digit increases, respectively.
The analyst highlighted Hyatt's strategic shift towards an asset-light model, which is expected to be a key focus for the company this year. The transition involves selling down assets and converting to a model that relies less on property ownership. While this strategy is anticipated to benefit the company in the long run, the analyst suggests it may impede EBITDA growth in the near term.
Hyatt's stock performance and strategic changes have been under scrutiny as the company navigates through the evolving hospitality landscape. The revised price target reflects a new valuation based on the firm's assessment of the stock's potential in the current market environment.
Investors and market watchers will be keeping a close eye on Hyatt's financial performance and strategic initiatives as the company continues to adapt to industry dynamics and shareholder expectations. The updated rating and price target from Evercore ISI serve as a gauge for the market's view on Hyatt's future prospects.
InvestingPro Insights
The recent downgrade of Hyatt Hotels Corporation (NYSE:H) by Evercore ISI to 'In Line' comes amidst a period of significant stock growth, with Hyatt's stock nearing its 52-week high, trading at 97.96% of this threshold. This bullish trend aligns with the company's robust performance over the last three months, as reflected in the 25.23% total return in that period. These metrics underscore the market's positive reception to Hyatt's strategic moves and its growth trajectory.
InvestingPro data further reveals that Hyatt has a market capitalization of $13.3 billion and is operating with a moderate level of debt, which is a significant factor for investors considering the stability and financial health of the company. Additionally, the company has demonstrated a commendable revenue growth of 20.05% over the last twelve months as of Q3 2023, suggesting that its asset-light model shift may be starting to bear fruit despite near-term pressures on EBITDA growth.
However, as per InvestingPro Tips, there are concerns that Hyatt's net income is expected to drop this year, and its short-term obligations exceed its liquid assets. These factors could introduce some caution into the investment thesis. For investors looking for deeper analysis and additional insights, there are more InvestingPro Tips available that can be accessed through a subscription. Currently, InvestingPro is running a special New Year sale with discounts of up to 50%. Use coupon code SFY24 to get an additional 10% off a 2-year InvestingPro+ subscription, or SFY241 to get an additional 10% off a 1-year InvestingPro+ subscription, offering a comprehensive perspective for making informed decisions.
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