Jefferies analysts adjusted the price targets on several hotel stocks in a note Tuesday while also downgrading shares of Choice Hotels (NYSE:CHH) to Underperform from Hold and upgrading Park Hotels & Resorts (NYSE:PK) to Buy from Hold.
The firm raised the PK price target to $21 from $14, the Marriott (MAR) price target to $227 from $205, the Hilton (HLT) price target to $183 from $157, and the Hyatt Hotels (NYSE:H) target to $127 from $104 per share. The CHH price target was cut to $96 from $119.
Analysts told investors that the recent change in the interest rate outlook supports higher valuations for the names.
"The Street's concern in the past year has been the expectation of a recession in 2H23, which has been progressively pushed forward to a widely debated potentially mild recession in 2024," explained the analysts. "Thus our estimates progressed from down in 2024 to flat and now modestly higher on improving demand, mixed business transient and mixed comps in leisure travel."
However, they noted that the fundamental outlook for lodging is still somewhat mixed. "Group demand continues to be the key driver for growth in 2024, whereas leisure transient is complicated by demand softness and the international outbound/inbound imbalance from this year that is market-dependent," the analysts added.
Furthermore, the analysts said business transient demand remains a wild card with a more gradual recovery than expected as large corporations lag behind 2019 levels with limited visibility.