On Wednesday, BMO Capital Markets adjusted its outlook on Hilton Worldwide Holdings Inc. (NYSE:HLT), increasing the shares price target to $215 from the previous $203, while maintaining a "Market Perform" rating stock.
The adjustment follows Hilton's first investor day since 2016, where the company presented an improved forecast, including compound annual growth rates (CAGRs) for the period from 2023 to 2026. The expected CAGRs are 3% for Revenue per Available Room (RevPAR), 6.5% for Net Unit Growth (NUG), 10% for fees, 9.5% for EBITDA, and 15% for Earnings Per Share (EPS).
The analysis highlighted Hilton's long-term growth potential, which is supported by market share gains evident in its development pipeline and a RevPAR index premium of 116. The growth is further underpinned by a planned $10 billion capital return to shareholders. Additionally, Hilton has opportunities to expand through new brand introductions, moving into different chain scales such as luxury, and geographic growth.
However, BMO Capital noted that Hilton's stock valuation, with an 18.4 times Enterprise Value to EBITDA (EV/EBITDA) and 29.6 times the projected 2024 Price to Earnings (P/E) ratio, reflects a balanced risk/reward scenario. Consequently, the firm suggests that investors might consider waiting for a more opportune entry point to become more positive on the stock.
The report from BMO Capital offers insight into Hilton's strategic direction and financial health, as the company aims to leverage its strong brand presence and operational performance to deliver shareholder value over the coming years. Hilton's commitment to capital return and expansion indicates a positive outlook for its future growth and profitability.
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