Tuesday, Mizuho Securities adjusted its price target on Hilton Worldwide (NYSE: HLT) shares, bringing it down slightly from $245.00 to $242.00, while reaffirming its Buy rating on the stock.
The firm based its revised target on a valuation pegged at 17 times its estimated 2026 Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) for the company, which it projects to be $3.94 billion. This figure is slightly below the consensus estimate of $4.0 billion.
The firm's rationale for the price target adjustment is rooted in its expectations for the hospitality industry and Hilton's strategic positioning within it. Analysts at Mizuho believe that the industry's fundamentals are robust and that Hilton is well-placed to capitalize on its strong brand, potentially gaining a larger share of new units in the future.
They highlighted particular market segments where Hilton has significant exposure, such as the Asia-Pacific region, business transient and group travel, and the midscale to upper-midscale segment, which are predicted to grow faster than the overall industry.
Mizuho's forecast includes an assumption of approximately 2% growth in Revenue Per Available Room (RevPAR) for the year 2024, followed by 1.1% in 2025 and 0.9% in 2026. The firm also anticipates a 6% increase in unit growth for 2024, with a further 7% growth expected in both 2025 and 2026. These projections contribute to the firm's EBITDA estimate of $3.94 billion for 2026.
The financial institution also provided insights into its free cash flow expectations for Hilton, estimating a two-year cumulative Free Cash Flow (FCF) of $3.4 billion for the years 2024 and 2025. This FCF projection is an integral component of the firm's valuation model and price target calculation for Hilton Worldwide.
InvestingPro Insights
With Mizuho Securities maintaining a positive outlook on Hilton Worldwide (NYSE: HLT), it's worth noting that Hilton's market fundamentals are echoed by some impressive InvestingPro metrics. As of the last twelve months leading up to Q4 2023, Hilton boasts a substantial gross profit margin of 74.12%, reflecting its strong operational efficiency. This aligns with one of the InvestingPro Tips highlighting Hilton's impressive gross profit margins. Additionally, the company's revenue has grown by 17.99% over the same period, indicating a healthy expansion in its financial performance.
Investors should also consider that Hilton's stock has experienced a significant price uptick of 32.2% in the last six months, suggesting a robust investor confidence which could be attributed to the company's strong brand and market positioning. However, it's important to be aware that Hilton is trading at a high earnings multiple with a P/E ratio of 45.12, which may indicate that the stock's growth expectations are high relative to earnings.
For those looking to delve deeper into Hilton's financials, there are additional InvestingPro Tips available, offering a comprehensive analysis of the company's performance and potential. Using coupon code PRONEWS24, readers can get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, granting access to these valuable insights. With 12 more InvestingPro Tips waiting to be explored, investors can make well-informed decisions backed by detailed data and expert analysis.
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