Investing.com -- Jefferies upgraded Marriott International (NASDAQ:MAR) and Hilton Worldwide Holdings (NYSE:HLT) to Buy from Hold in a note Monday, citing the strength and resilience of their asset-light business models in the face of economic uncertainty.
“We believe the business model strength is positioned to grow through the currently uncertain business climate,” Jefferies analysts wrote.
They added that “peak multiples (17.5X for MAR, 19.5X for HLT) are appropriate as shares currently trade mid-range (15.1X, 16.7X).”
Jefferies identified net unit growth (NUG) as the key long-term driver of earnings, rather than cyclical metrics like revenue per available room (RevPAR).
“NUG has proven the core model driver, despite anemic, volatile RevPAR since 2017,” analysts noted, pointing to MAR and HLT’s track records of delivering “durable MSD NUG” alongside consistent fee, EBITDA, and free cash flow growth.
Jefferies also highlighted the compounding benefits of system expansion, including loyalty program gains and growing co-branded credit card revenue.
Since 2019, loyalty programs have grown at a 10% CAGR for MAR and 15% for HLT, while card fees are projected to grow faster than core fees through 2027.
Despite potential short-term risks to estimates, Jefferies said now is a favorable time to buy.
“History suggests that times of low visibility have proven opportune,” with both stocks down 15% to 20% from February highs. Since 2015, MAR and HLT shares have returned 340% and 560%, respectively.
Jefferies raised its price targets using “near-peak multiples” on 2026 estimates, applying 17.5X EV/EBITDA and 28.5X P/E for MAR and 19.5X EV/EBITDA and 35X P/E for HLT, concluding that “the earnings growth & durability of MAR and HLT justify a higher valuation.”