The Post-Pandemic Vaccine Trade
While we are not yet out of the woods the progress of vaccine development and distribution has altered the course of the pandemic. With an end more-clearly in the market’s sights, the industries worst hit by the COVID-19 shutdowns are ready to spring back. This includes the whole gamut of travel and leisure stocks but the ones I want to highlight today are the hotels. The hotel stocks, particularly the big, globally-oriented chains, have seen a steady increase in analyst sentiment that is opening up an opportunity for investors today.
The latest nod comes from Citigroup (NYSE:C). In their report, they upgrade both Hilton Worldwide Holdings (NYSE:HLT) and Marriot International (NASDAQ:MAR) giving a special shout-out to Marriot. In the note to investors, Citigroup raised the rating from neutral to buy citing the beginning of vaccine distribution gives it the confidence to begin altering the long-term view for the sector.
"We upgrade MAR to Buy with an overweight position in our model portfolio and a $150 price target, or 21.0x 2022E EBITDA. We believe the industry is on the cusp of a multiyear recovery; MAR can likely return to prior peak earnings sooner relative to owners given not only improving revenue trends but also continued 3-4% annual net unit growth."
Over the course of the last 90 days, the average analysts rating has been on the rise. That said, the consensus target is still about 5% below the current price action. Citigroup is the first analyst in the last 30 days to issue a statement and it carries the Wall Street high price-target or upside of 20%.
Hilton Worldwide Is Leading The Pack Higher
Hilton Worldwide Holdings is leading the entire hotel sector higher. This company has seen a steady increase in analysts ratings over the past 90 days that have it rated a firm Buy. In that time, the consensus target has risen more than 15% but is still only in-line with the current price action. Once again, Citigroup has the Wall Street high price target of $130 which implies a 50% upside.
Argus was among the very first to call out Hilton as a vaccine play. The analysts there see several catalysts for the company over the coming year that will be unlocked by the vaccine and increased travel.
"We believe that the development of an effective coronavirus vaccine, which now seems more likely in the near term, will boost room demand by allowing consumers to travel more freely … Our long-term rating on HLT remains BUY based on the company's solid development pipeline, new brands, and well-regarded loyalty program. We also expect earnings to benefit from the spinoff of the timeshare businesses and the sale of additional company-owned hotels."
Hyatt Hotels Corporation Is … Growing?
Hyatt Hotels Corporation (NYSE:H) is lagging the market in terms of analyst’s love but it is not forgotten. The stock’s average rating hasn’t budged in the last 60 days but the consensus target is edging higher. With progress expected in the other major global hotel corporations, it makes sense the same is due to Hyatt. Until then, investors will have to be pleased with the company’s growth in these troubled times.
What Hyatt execs have discovered is that independent operators in the world’s hottest travel destinations need help. The help Hyatt gives is a global brand and deep support infrastructure to help drive business. The company has already opened 9 new Hyatt-branded properties in the EU this year with 20 more expected in both the EU and the Americas within the next couple of years.
