- Raymond James analyst William Crow reiterated Outperform rating on the shares of Hilton Worldwide Holdings Inc HLT and raised the price target from $150 to $165.
- The company reported better-than-expected Q4 results and guidance, calling for 4-8% RevPAR growth
- Despite the near-term macro headwinds, management is not seeing any signs of weakening fundamentals and believes that rising demand, along with the historically low industry supply growth, should drive strong pricing.
- Business transient demand continued to improve during 4Q, with management noting resiliency/growth among small and medium-sized businesses, added the analyst.
- Management expects group business trends to continue accelerating this year, with group pace YTD up 25% y/y and near 2019 levels, with tentative bookings up 20% y/y, pricing up in the low single-digits, and January lead volumes at an all-time high.
- Hilton already has 200 conversions in various stages of negotiation since announcing its new premium economy brand, Spark, the analyst remarked.
- Also Read: Hilton Hotels Launches New Brand 'Spark By Hilton'
- Management suggested that 98% of its Spark-conversion pipeline comes from non-Hilton brands.
- Management forecasted a flattening or slight decrease in pricing power in 2H and noted that better-than-expected occupancy in 2H could provide an upside to initial 2023 guidance.
- The analyst said the unit growth and share repurchase stories remain very much intact.
- The analyst prefers HLT to its c-corp peers here, but we also see more upside to the lodging REITs over the near term.
- Longer-term, however, the analyst continues to prefer the asset-light, fee-driven, capital return-focused brand companies.
- Price Action: HLT shares are trading higher by 1.60% at $149.52 on the last check Monday.
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