JPMorgan Downgrades Hilton Grand Vacations After Q2 Print, Says Stock In 'Penalty Box'

Hilton Grand Vacations Inc HGV shares were falling Friday after JPMorgan downgraded the stock.

The Analyst

Brandt Montour downgraded Hilton Grand Vacations from Neutral to Underweight and lowered the price target from $30 to $24.

The Thesis

JPMorgan expects poor sentiment to weigh on shares until contract sales reaccelerate in a consistent way, which the sell-side firm does not expect to occur until 2020, Montour said in the downgrade note. (See his track record here.)

Hilton Grand's deed-based business model — rather than points — is a structural disadvantage compared to its peers, the analyst said.

Overall, the timeshare business has not been performing well, with all three major timeshare operators either reporting muted contract sales growth, in the case of Wyndham Destinations Inc WYND, or lower full-year contract sales guidance, in the case of HGV and Marriott Vacations Worldwide Corp VAC, he said.

“We wouldn’t be surprised if investors start re-questioning consumer demand for timeshare more broadly here,” Montour said.

Hilton Grand Vacations reported another weak second quarter on Thursday, characterized by what Montour said were deteriorating timeshare contract sales trends and lower operating and earnings guidance metrics for the full year.

"Yesterday’s results likely put HGV into the penalty box with investors."