Marriott Looks Overvalued Ahead of Monday Report

Marriott International Inc. (MAR) reports Q1 2021 earnings ahead of Monday’s opening bell, with analysts looking for a profit of just $0.04 per-share on $2.41 billion in revenue. If met, earnings-per-share (EPS) will mark less than one-tenth of the profit posted in the same quarter last year. The stock gained ground despite reporting a 59.6% Q4 2020 revenue decline in February but topped out a week later and has been rangebound since that time.

Empty Hotel Rooms

Rivals Hyatt Hotels Corp. (H) and Hilton Worldwide Holdings Inc. (HLT) missed Q1 estimates by wide margins last week, prompting selloffs throughout the lodging sector. Both companies posted revenue declines in excess of 50%, raising doubts about the much-heralded ‘return to normalcy’ following broad-based US vaccination efforts. The dismal results add to growing pessimism that Marriott will need to overcome this week to attract buying interest.

Marriott and rivals are dependent on international business travel, which will recover at a slower pace than recreational travel due to sluggish vaccine uptake in Europe and parts of Asia. In addition, the virtual meeting space is here to stay, likely to dampen revenues long after the pandemic runs its course. Sector stocks look highly overvalued given those bearish catalysts, trading near all-time highs thanks to the ultra-hot US equity markets.

Wall Street and Technical Outlook

Wall Street consensus now stands at a ‘Moderate Buy’, based upon 3 ‘Buy’ and 8 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $116 to a Street-high $168 while the stock closed Friday’s session about $8 above the median $138 target.  Upside appears limited due to this elevated placement, at least until warm bodies fill hotel rooms at a greater pace.

Marriott broke out above 2018 resistance at 149 in December 2019 and failed the breakout during 2020’s pandemic decline. A multiwave uptick reached the prior high in February 2021, yielding a breakout that also failed. Price action since that time has carved a descending triangle with horizontal support near 139 while accumulation has eased into a neutral holding pattern. Bears hold a modest edge in this set-up but earnings is likely to generate more smoke than fire.

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Disclosure: the author held no positions in aforementioned securities at the time of publication.