On Thursday, PebbleBrook Hotel Trust (NYSE:PEB) shares received an upgrade in its stock rating from Compass Point. The firm shifted its stance on the hotel trust from Neutral to Buy, while maintaining a steady price target of $17.00. The upgrade comes as a contrarian trading call amid the company's significant lag behind its sector peers year-to-date (YTD).
The analyst at Compass Point noted that despite PebbleBrook's underperformance relative to the sector this year, the company is projected to achieve the second-highest Adjusted EBITDA growth in 2025 according to their estimates. This potential for growth played a key role in the decision to elevate the stock's rating.
Moreover, the high short interest in PebbleBrook, which is the highest within its sector, alongside recent stock purchases by CEO Jon Bortz, are seen as indicators that the stock may have reached a bottom. These factors contributed to the analyst's optimistic outlook on PebbleBrook's stock performance moving forward.
The price target of $17.00 remains unchanged despite the upgrade. This decision reflects the stock's 24% decline over the course of the year. The rating change and maintained price target indicate a belief in the company's potential for recovery and growth despite recent market challenges.
Investors and market watchers will be keeping an eye on PebbleBrook Hotel Trust's stock performance in the coming year, especially in light of the analyst's projections for substantial EBITDA growth and the recent actions of the company's CEO.
In other recent news, Pebblebrook Hotel Trust (NYSE:PEB) reported a modest increase in revenue per available room (RevPAR) and exceeded financial expectations in its third-quarter earnings call.
Despite challenges such as Hurricanes Debby and Helene, a brand conversion, and capital investments, the company saw a rise in same-property RevPAR and out-of-room spending, along with a strong recovery in urban markets. The company reported a 2.2% increase in same-property RevPAR and a 2.7% rise in total RevPAR, with out-of-room spending growing by 3.8%.
The company's same-property hotel EBITDA reached $110.8 million, surpassing guidance by $8.7 million. Adjusted FFO exceeded expectations by $9.7 million, partly due to $7.1 million in business interruption proceeds. Among recent developments, the Delfina Santa Monica Hotel was rebranded to Hyatt Centric, with a $16 million refresh completion expected by Q1 2025.
However, the company projects that hurricanes and the rebranding will reduce Q4 same-property RevPAR by about 100 basis points. Pebblebrook also issued $400 million in senior unsecured notes and extended bank term loans to 2029, with no significant debt maturities until December 2026. The company anticipates improved performance in 2025, driven by urban market recovery, redeveloped property growth, and favorable group booking pace.
InvestingPro Insights
To complement the analysis provided by Compass Point, recent data from InvestingPro offers additional context on PebbleBrook Hotel Trust's (NYSE:PEB) financial position and market performance. The company's market capitalization stands at $1.49 billion, with a price-to-book ratio of 0.54 as of the last twelve months ending Q3 2024, suggesting the stock may be undervalued relative to its book value.
InvestingPro Tips highlight that PEB is trading at a low revenue valuation multiple, which aligns with the analyst's view that the stock may have bottomed out. This could present an opportunity for value investors, especially considering the company has maintained dividend payments for 15 consecutive years, demonstrating a commitment to shareholder returns despite recent challenges.
However, it's important to note that PEB was not profitable over the last twelve months, with a negative P/E ratio of -108.1. This underscores the importance of the projected EBITDA growth mentioned in the Compass Point analysis for the company's future financial health.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips for PebbleBrook Hotel Trust, providing a deeper dive into the company's financial metrics and market position.
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