Hyatt Hotels To See 25% FCF/Share Growth Through 2025: Analyst

Morgan Stanley analyst Stephen W Grambling reiterated an Overweight rating (Top Pick) on the shares of Hyatt Hotels Corporation H with a price target of $139.
Hyatt stock is up 23% YTD and 23% over the past year, outperforming not only the S&P 500 (+1%/-9%), but also the analyst's lodging coverage (+6%/-13%).
From 2019-2023, the analyst expects Hyatt to have sold more than $2.3 billion in real estate value, grown its room count by 22% organically (ex-ALG rooms), grown EBITDA 60%, and FCF/share 182% – all while taking on very modest debt, said the analyst.
Notably, the analyst estimates the company still has more than $4 billion in gross real estate value and a pipeline of new hotels equating to 48% growth on the current managed & franchised base.
The analyst expects a re-rating to unfold from the combination of fundamental upside as China / Group recovers and as the company continues to execute on its strategy of selling down assets and growing the asset-light business.
In 2022, Hyatt improved its conversion rate for both CFO (74%) and FCF (64%), reflecting the positive free cash flow inflection from the asset-light transition.
The analyst expects ongoing asset sales, growth in managed & franchised fees, and reduced capital intensity all powering ~25% FCF/share growth through 2025.
Price Action: H shares are trading higher by 2.52% at $110.50 on the last check Tuesday.
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