Time To Sell Lodging Stocks? Morgan Stanley Downgrades En Masse

Morgan Stanley’s Thomas Allen downgraded the rating on the Lodging Industry to In-Line, mentioning that the stocks had gained 16 percent in the last 30 days.

While historical mid-cycle multiples have been in the 11-12x range and lodging companies are better run now, in terms of higher ROIC and SS margins, than they were in previous cycles, concerns surrounding another recession in the near term suggest that mid-cycle multiples are no longer appropriate, analyst Thomas Allen commented.

Hyatt Hotels And Xenia Hotels

Morgan Stanley downgraded the ratings for Hyatt Hotels Corporation H and Xenia Hotels & Resorts Inc XHR to Equal-weight, while maintaining the price targets at $48 and $17, respectively.

Allen sees a more balanced risk/reward, since the stocks of the two companies have appreciated 20 percent and 12 percent, respectively, in the last one month. While Hyatt Hotels continues to have an attractive balance sheet and Xenia Hotels has significant underappreciated assets, these catalysts will take a long time to play out.

Starwood Hotels

Allen downgraded the rating for Starwood Hotels & Resorts Worldwide Inc HOT to Equal-weight, while raising the price target from $72 to $77, to reflect the mid-point of two takeout offers received by the company.

Starwood Hotels’ shares had reached within 5 percent of the recent Anbang takeout offer of $80 including Vistana. The offer price of $80 is higher than the implied $73 accepted offer from Marriott International Inc MAR, Allen stated.

La Quinta Holdings

Morgan Stanley downgraded the rating for La Quinta Holdings Inc LQ to Equal-Weight, while reducing the price target from $13 to $12.

The analyst mentioned that the company’s high exposure to the oil market is a major headwind, since oil prices are expected to decline this year. The 2016 EBITDA estimate has been reduced from $369 million to $364 million.