On Tuesday, UBS issued a downgrade for Melia Hotels International SA (BME:MEL:SM) (OTC: SMIZF), adjusting the stock's rating from Buy to Sell. The new price target set by UBS is €6.80, a decrease from the previous target of €8.92. The downgrade reflects the analysts anticipation of a more challenging year ahead for the company.
UBS analysis suggests that the pace of earnings growth for Melia Hotels is expected to slow significantly. This is primarily due to the forecasted deceleration in revenue per available room (RevPAR), which is predicted to drop from over 10% in 2024 to around 3% in 2025. Additionally, the expected slowdown in RevPAR is likely to make margin expansion more difficult for the hotel operator.
The UBS analyst forecasts a potential decline in EBITDA margin for Melia Hotels, from 26.7% to 26.4%. This slight contraction of the margin is tied to the anticipated challenges in the operating environment.
Moreover, UBShighlighted long-term concerns regarding the impact of climate change on the hospitality industry, particularly for resort operators located in coastal regions. This factor contributed to the decision to downgrade the stock rating.
The downgrade comes with an expectation that Melia Hotels, while still potentially experiencing earnings growth, will face headwinds that could affect its financial performance in the near future. The revised price target from UBS reflects these concerns and the anticipated changes in the company's revenue and margin dynamics.
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