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Bank of America Upgrades Hyatt Stock; Here’s Why
Stock Analysis & Ideas

Bank of America Upgrades Hyatt Stock; Here’s Why

Hyatt Hotels (H) is an American multinational hotels group. The firm operates a hybrid ownership-leasing model with ancillary services such as ASPAC management. I am bullish on the stock.

Bank of America Upgrade

Bank of America recently upgraded its Hyatt stock price target to $110 from a previous $85. The double upgrade from Underperform to Buy comes as a result of the big bank identifying Hyatt as a leader in the lodging recovery.

According to Bank of America analyst Shaun Kelley: “Hyatt is making important strides in its capital-light transition, which should help close the valuation gap to peers as well.” He also added that Hyatt’s balance sheet is in good shape relative to its peers, which could protect against any potential drawdowns in the REIT space.

Kelley also thinks that C-corps will recover faster than anticipated and that it could be a good cycle rotation for investors at the moment. He claimed the following: “We are Buy rated on Hyatt given the company’s recovery runway relative to other C-corps, combined with limited inflation/labor risk in its franchised estate.”

Kelley is spot on in his analysis. Hyatt’s balance sheet shows that it’s a very liquid company with $2.77 billion of cash and short-term investments at hand. The firm has also reduced its operating costs as a proportion of revenue from 92.3% to 70.5% over the past year, suggesting that it’s running a more nimble business model than it was before.

Gaining Momentum

Recently, Hyatt stock has formed a momentum pattern by trading above its 50-, 100-, and 200-day moving averages. Investors should also consider that this is a stock that’s surprised on EPS results in eleven of its past twelve quarters.

Earnings surprises can be a springboard for stocks and create a long-term momentum pattern. They signal high-quality money management, which is exactly what you’re looking for if you’re concerned about shareholder value creation.

I’d say that Hyatt stock is in great shape amid the apparent loosening of COVID-19 policy plans for 2022 and the continued economic recovery. These factors could provide cause for the stock to sustain the index-beating run it achieved over the past year.

Wall Street’s Take

Turning to Wall Street, Hyatt has a Moderate Buy consensus rating, based on five Buys and six Holds assigned in the past eleven months.

The average Hyatt Hotels price target of $93.18 implies 2.2% downside potential, but this target will likely be revised upwards as analysts’ new year’s price targets start rolling in this month.

Conclusion

Bank of America has a valid claim regarding Hyatt stock. A bottoms-up analysis shows that its cost-saving along with a strong balance sheet could be key to its performance amid a sector recovery.

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