On Thursday, Morgan Stanley adjusted its financial outlook on Atour Lifestyle Holdings (NASDAQ:ATAT), reducing the price target to $31 from the previous $32, while continuing to endorse the stock with an Overweight rating. The revision follows Atour Lifestyle's first-quarter 2024 earnings release, during which the company provided new guidance.
The firm revised its revenue forecasts for the fiscal years 2024 through 2026, increasing them by 5%, 4%, and 4%, respectively. This change is in response to the company's updated retail revenue projections, which are now expected to grow by over 80% year-over-year in fiscal 2024, exceeding the initial estimate of a 60% increase.
Despite the higher revenue expectations, Morgan Stanley anticipates a lower profit margin for the increased sales, as the retail segment yields thinner margins compared to Atour Lifestyle's traditional hotel operations. Consequently, the firm has decreased its EBITDA margin forecasts by 3% for fiscal 2024 and by 8% for fiscal 2025 and 2026.
The adjustments to the profit margins have also led to changes in the earnings per share (EPS) estimates. Morgan Stanley now projects a 1% increase in EPS for fiscal 2024, but a decrease of 4% for both fiscal 2025 and 2026. The amended price target reflects these alterations, particularly the EBITDA margin reductions for fiscal years 2025 and 2026, as well as forward-looking projections.
InvestingPro Insights
Atour Lifestyle Holdings (NASDAQ:ATAT) is demonstrating robust financial health and market performance, according to recent data from InvestingPro. With a market capitalization of $2.42 billion and a forward P/E ratio of 24.38, the company is trading at a premium compared to the industry average. This premium is further reflected in a high Price / Book multiple of 8.44, indicating investor confidence in the company's asset value and future growth potential.
InvestingPro Tips highlight that Atour Lifestyle Holdings is a key player in the Hotels, Restaurants & Leisure industry and is expected to be profitable this year, having already been profitable over the last twelve months. The company's strong cash position, with cash reserves exceeding its debt, along with its ability to cover interest payments comfortably, provides financial stability. Moreover, its liquid assets surpass short-term obligations, ensuring operational resilience.
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