Best Travel Stocks To Buy In June

Key Insights

  • The market sentiment in the travel segment has improved despite high oil prices. 
  • Earnings estimates are rising as analysts bet on strong pent-up demand for travelling. 
  • Booking Holdings and Marriott International are not cheap but their earnings estimates are moving higher at a robust pace.

Travel stocks continue to rebound as the market prepares for a strong summer season. Meanwhile, analyst estimates for these companies are moving higher, which serves as an additional upside catalyst. Let’s take a look at several stocks that have a good chance to gain additional upside momentum due to rising estimates.

Booking Holdings

Shares of Booking Holdings managed to gain some upside momentum in recent weeks, which is not surprising at the start of the summer season.

Importantly, analyst estimates have been moving higher in recent months. Currently, analysts expect that Booking Holdings will report earnings of $99.33 per share in 2022 and $131.47 per share in 2023, so the stock is trading at 18 forward P/E.

This not too cheap, but traders are typically willing to pay a premium for one of the market leaders. In addition, it looks that pent-up demand for travelling is very strong after several years of coronavirus-related restrictions, so Booking Holdings revenue is set to grow.

Marriott International

Analyst estimates for Marriott International have also increased due to expectations of a strong summer season. The company is expected to report earnings of $5.96 per share in the current year and $7.32 per share in the next year, so the stock is trading at 24 forward P/E.

While Marriott International is not cheap, the market looks ready to focus on the company’s future which is not limited to the next year. Analyst estimates keep advancing at a robust pace, indicating that business fundamentals remain strong.

The stock reached its all-time high levels back in April and should be ready to move closer to these levels in case the general market rebound continues.

To keep up with the latest earnings updates, visit our earnings calendar.

Marriott Bookings Near Pre-Pandemic Levels

Marriott International Inc. (MAR) is trading higher by 2% in Wednesday’s pre-market after beating Q1 2022 profit estimates by a wide margin and reinstating its dividend after suspending the payout in February 2020. The company reported earnings of $1.25 per-share, $0.33 higher than expectations, while revenue rose a healthy 81.3% year-over-year to $4.2 billion, just below consensus. Occupancy rose from 45% in January to 64% in March, less than 10% below pre-pandemic levels.

Business Travel Returning to Normal

The lodging giant reported the largest surge in global demand since the start of the pandemic, with massive immunity generated by vaccines and natural infection dropping hospitalization rates. The end of most government mandates has encouraged businesses to reinstate physical travel, finally walking away from the virtual meeting place, hopefully for the last time. Even so, travel costs are soaring due to rising fuel prices, causing some companies to retain cheaper alternatives.

Marriott also reported a strong quarter in February but Omicron kept many investors on the sidelines. The company is faring better than many rivals, with Hilton Worldwide Holdings Inc. (HLT) missing revenue estimates and issuing downside guidance on Tuesday. That stock is now trading at a three-week low after posting an all-time high in April. Technically speaking, Hyatt Hotels Inc. (H) is the weakness of the three majors, still oscillating near February 2020 resistance ahead of May 10th earnings.

Wall Street and Technical Outlook

Wall Street consensus stands at a mediocre ‘Hold’ rating based upon 7 ‘Buy’, 1 ‘Overweight’, 14 ‘Hold’, and 1 ‘Underweight’ recommendation. No analysts are recommending that shareholders close positions. Price targets currently range from a low of $164 to a Street-high $210 while the stock is set to open Wednesday’s session about $3 below the median $179 target. This modest placement bodes well for an uptick reaching the all-time high at 196, posted just two weeks ago.

Marriott topped out near 150 in 2018 when President Trump started the trade war with China. It tested that price level in February 2020 and sold off to a 6-year low during March’s pandemic decline. The subsequent rally reached resistance in March 2021, ahead of a September breakout that eased into a rising channel pattern. That bullish formation is still in place, suggesting the stock is engaged in a long-term uptrend that reaches 200 as the next short-term target.

Catch up on the latest price action with our new ETF performance breakdown.

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

Best Travel Stocks To Buy Now

Key Insights

  • Airline stocks have rallied as traders focused on strong demand for travelling ahead of the summer season. 
  • Travel stocks like Booking and Expedia have not developed upside momentum, but they trade at reasonable valuations and have a good chance to gain more ground. 
  • In case the situation with coronavirus continues to improve, this market segment will attract more interest. 

Airline stocks have already enjoyed a strong rally from recent lows as the market focused on pent-up demand ahead of summer, and it’s high time to take a look at travel stocks, which may also benefit from the recent trends.

Booking Holdings

Booking stock is down by about 6% year-to-date. Analysts expect that the company will report earnings of $89.7 per share in the current year and earnings of $122.94 per share in the next year, so the stock is trading at roughly 18 forward P/E.

While Booking’s price does not look too cheap, the company’s shares are trading at a reasonable valuation level and have a good chance to gain upside momentum ahead of the summer season.

Marriott International

Trading at 27 forward P/E for 2023, Marriott is more expensive than Booking. However, analyst estimates for the hotel chain have been steadily moving higher in recent months, and it’s not surprising to see that traders are willing to pay a premium for the company’s stock.

It should be noted that Marriott shares have recently tested all-time high levels, so the stock has a solid technical momentum.

Expedia Group

Like Booking, Expedia stock is also trading at 18 forward P/E, and earnings estimates keep moving higher. Expedia stock is up by about 4% year-to-date, so the stock failed to develop upside momentum despite rising analyst estimates.

However, Expedia stock should have a decent chance to move towards the yearly highs that were tested back in February in case traders focus on strong demand for travel ahead of summer.

For a look at all of today’s economic events, check out our economic calendar.

Shares of Hotel Giant Marriott Rise on Q4 Earnings Beat

Shares of global hotel giant Marriott jumped nearly 3% in pre-market trading on Tuesday after the hospitality company reported better-than-expected earnings and revenue in the fourth quarter, largely driven by higher vaccination rates and the relaxation of travel restrictions during the holiday season.

The Bethesda Maryland-based company reported a net income of $468 million, or $1.42 per share, compared to a loss of $164 million, or 50 cents per share, a year ago. The U.S. hotel operator reported quarterly adjusted earnings per share of $1.30, beating the Wall Street consensus estimates of $1.04 per share.

The company’s revenue more than doubled to $4.45 billion. That too surpassed the market expectations of $3.98 billion. The increase in travel during the holiday quarter as well as the easing of travel restrictions supported the revenue growth.

“While Omicron caused a temporary setback in global demand recovery in January, especially for business transient and group travel, new bookings across customer segments have rebounded to pre-Omicron levels. We are optimistic that the global recovery will progress meaningfully throughout 2022,” said Anthony Capuano, Chief Executive Officer.

For this year, Capuano expects gross rooms growth approaching 5% and deletions of 1 to 1.5%, resulting in anticipated net rooms growth of 3.5 to 4%. Marriott anticipates that full-year 2022 investment spending will total $600 million to $700 million.

Marriott stock rose 2.78% to 176.10 in pre-market trading on Tuesday. The stock rose nearly 5% so far this year after surging over 25% in 2021.

Analyst Comments

“The stronger-than-expected results should be a positive surprise for the stock, which continues to support our bullish view and Street-high target. In particular, the better-than-expected NUG and forward guide thereon are both supportive of the shares continuing to progress higher,” noted David Katz, Equity Analyst at Jefferies.

“Finally, although Mgt has not yet guided toward capital allocation, the strong quarter supports our forecasted capital returns by 2H22.”

Marriott Stock Price Forecast

Eight analysts who offered stock ratings for Marriott in the last three months forecast the average price in 12 months of $169.13 with a high forecast of $192.00 and a low forecast of $150.00.

The average price target represents a -1.28% change from the last price of $171.33. Of those eight analysts, three rated “Buy”, five rated “Hold”, while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $158 with a high of $226 under a bull scenario and $115 under the worst-case scenario. The investment bank gave an “Equal-weight” rating on the lodging company’s stock.

“We expect US industry RevPAR to take ~4 years to recover back to 2019 levels post COVID given our corporate travel surveys suggest structural headwinds. Largest hotel brand company globally creates economies of scale, but also law of large numbers has led to lower unit growth than peers,” noted Thomas Allen, equity analyst at Morgan Stanley.

“With the stock trading above its historical avg multiple, we see too wide a risk-reward to justify recommending, with upside/downside driven by how strong and quickly business trends return to normal post-COVID-19.”

Several analysts have also updated their stock outlook. Berenberg raised the target price to $165 from $130. BofA Global Research lifted the price objective to $190 from $180. Cowen and company upped the target price to $180 from $170.

Technical analysis suggests it is good to buy as 100-day Moving Average and 100-200-day MACD Oscillator shows a strong buying opportunity.

Check out FX Empire’s earnings calendar

What Does Russia’s Threat Really Mean for Markets?

Russian officials maintain they have no plans to invade and say they are seeking a diplomatic way forward. Western officials don’t fully believe Russia’s claims, pointing to the continued military buildup along Ukraine’s borders. Both sides accuse the other of waging propaganda campaigns and Ukraine itself has made conflicting claims about how high the threat level really is.

Many Russian experts say that Russia’s economy won’t support an invasion of Ukraine and believe that Russian President Vladimir Putin is just trying to squeeze concessions out of the West.

Still, just the possibility of Russia’s oil supplies being interrupted has sent crude oil prices over +$95 per barrel with some insiders warning that an escalation in the standoff could send futures prices soaring to +$150.

Keep in mind, many oil insiders believe crude prices could top $100 per barrel in the near-term even without an armed conflict in Ukraine due to a growing supply deficit. Higher oil prices complicate the inflation fight that the Federal Reserve is now trying to battle.

Federal Reserve policy

While higher oil prices exacerbate inflation, there is nothing that central bank policy can do to impact oil markets. So we have a situation of higher oil prices adding to already high inflation at the same time that the Federal Reserve is preparing to raise interest rates.

Most economists fear this is a recipe for slower economic growth, possibly even recession.

When the Fed said inflation was “transitory” back in the summer of 2020 I doubt they were forecasting “delta” the major second wave of the virus and or forecasting the third “omicron” wave of the virus. I also doubt they thought about Russia and China aggressively flexing their muscles or perhaps even working to pour gas on the inflationary fires that are currently burning.

Nonetheless, here we are with investors talking about perhaps the start of an extended bear market in stocks, i.e. in 2000 the S&P 500 was down -9%, in 2001 it was down by another -13%, and ended in 2002 by tumbling another -23%. I’m certainly not saying we are going to repeat the dot.com bubble bursting but there is a chance we could continue to make lower highs and lower lows until the market is more certain about Fed policy and their rate of change and more certain about some of the geopolitical jockeying that could keep inflation hotter than some bulls have been forecasting.

St. Louis Fed President James Bullard told CNBC yesterday that the Fed needs to accelerate its pace of rate increases and repeated that he would like the Fed to raise its policy rate by 100 basis points by July. Bullard said previously that he supports starting with a 50-basis point rate hike in March and would like to see the central bank begin reducing its balance sheet by the end of Q2.

It’s worth mentioning that the “minutes” for the Fed’s January meeting will be released tomorrow which is guaranteed to be the most hawkish narrative to come out of the central bank since the start of the pandemic. It’s not likely to provide much in the way of clues as to what the Fed’s next move might be but it could provide some indication as to how many members are firmly planted in the aggressive policy tightening camp.

Data to watch

Today, bulls are nervous that the Producer Price Index could further stoke inflation fears if the gauge comes in higher than the +9.2% year-over-year rate that Wall Street is expecting. The December read did show signs of price pressures starting to ease but most of that was credited to lower energy prices in early December, which as we know have only marched higher since. Also due out today is Empire State Manufacturing.

Earnings today include Airbnb, Glencore, Invitation Home, Marriott International, Novozymes, Restaurant Brands, Roblox, ViacomCBS, and Zoetis. For full disclosure I still own shares and continue to be a long-term investor in Airbnb, Roblox, and Zoetis.

For a look at all of today’s economic events, check out our economic calendar.

Marriott Is Well Worth Watching Ahead of Q4 Earnings

Marriott International Inc., an American multinational and diversified hospitality company,  is expected to report higher earnings and revenues in the last quarter, largely driven by increased vaccination rates and the relaxation of travel restrictions as more people took advantage of the holiday period.

The Bethesda Maryland-based company would report its fourth-quarter earnings of $1.04 per share, which represents year-over-year growth of over 766% from $0.12 per share seen in the same period a year ago.

The U.S. hotel operator would post revenue growth of more than 83% to $3.98 billion from $2.17 billion a year earlier. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.

The increase in travel during the holiday quarter, as well as the easing of travel restrictions, would increase revenue. Analysts will be interested in hearing commentary on demand trends and forecasts for the year as well as information on the risks related to the Omicron variant of the coronavirus.

Marriott’s better-than-expected earnings results, which will be announced on Tuesday, Feb. 15 before the market opens, could help the stock scale to a fresh record high. Marriott stock traded 2.10% higher at $173.40 on Monday. The stock rose nearly 5% so far this year after surging over 25% in 2021.

Analyst Comments

“We expect US industry RevPAR to take ~4 years to recover back to 2019 levels post COVID given our corporate travel surveys suggest structural headwinds. Largest hotel brand company globally creates economies of scale, but also law of large numbers has led to lower unit growth than peers,” noted Thomas Allen, equity analyst at Morgan Stanley.

“With the stock trading above its historical avg multiple, we see too wide a risk-reward to justify recommending, with upside/downside driven by how strong and quickly business trends return to normal post-COVID-19.”

Marriott Stock Price Forecast

Eight analysts who offered stock ratings for Marriott in the last three months forecast the average price in 12 months of $169.13 with a high forecast of $192.00 and a low forecast of $150.00.

The average price target represents a -2.74% change from the last price of $173.90. Of those eight analysts, three rated “Buy”, five rated “Hold”, while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $158 with a high of $226 under a bull scenario and $115 under the worst-case scenario. The investment bank gave an “Equal-weight” rating on the lodging company’s stock.

Several analysts have also updated their stock outlook. Berenberg raised the target price to $165 from $130. BofA Global Research lifted the price objective to $190 from $180. Cowen and company upped the target price to $180 from $170.

Technical analysis suggests it is good to buy as 100-day Moving Average and 100-200-day MACD Oscillator shows a strong buying opportunity.

Check out FX Empire’s earnings calendar

Wall Street Week Ahead Earnings: Shopify, Baidu, Walmart, Deere and DraftKings in Focus

Investors will focus on December quarter earnings for stocks that are economically sensitive, which should show better profits than technology stocks. Increasing Treasury yields and risk aversion could hit the stock market hard over the coming months. In addition, investors will closely monitor the latest news on the rapidly spread Omicron coronavirus variant to see how it impacts earnings in 2022.

Earnings Calendar For The Week Of February 14

Monday (February 14)

TICKER COMPANY EPS FORECAST
AAP Advance Auto Parts $1.93
ALX Alexander’s $4.29
AMKR Amkor Technology $0.65
ANET Arista Networks $0.6
SRC Spirit Realty Capital $0.81
VNO Vornado Realty Trust $0.76
WEBR Weber $-0.02

Tuesday (February 15)

TICKER COMPANY EPS FORECAST
ABNB Airbnb $0.05
AKAM Akamai Technologies $1.14
DVN Devon Energy $1.24
MAR Marriott International $1.04
RPRX Royalty Pharma $0.79
VIAC ViacomCBS $0.37
WFG West Fraser Timber $3.51

 

Wednesday (February 16)

IN THE SPOTLIGHT: SHOPIFY, BAIDU

SHOPIFY: Canadian multinational e-commerce company is expected to report its fourth-quarter earnings of $0.62 per share, which represents a year-over-year decline of over 46% from $1.15 per share seen in the same period a year ago. But the e-commerce software company would post revenue growth of over 37% to $1.34 billion.

According to Barron’s report, Gary Robinson, investment manager at Baillie Gifford said that Shopify is miles ahead of its competitors in helping merchants all over the world sell their items. He added that the company’s revenue could rise sharply in the next five years.

BAIDU: The Chinese tech giant is expected to report its fourth-quarter earnings of $1.89 per share, which represents a year-over-year decline of nearly 40% from $3.08 per share seen in the same period a year ago.

However, Baidu Inc, a leader in the Chinese search industry in terms of user market share, would post revenue growth of about 9% to $5.04 billion. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.

“We maintain a “Buy” rating for Baidu (BIDU) with a target price of RMB 165. Our target price is based on the forward P/E of 18.48x and forward P/S of 0.42x for FY22. Non-GAAP EPS of RMB 56.59 ($8.98) for FY22. This provides an upside potential of 15% over the CMP of RMB 143.80,” noted Shejal Ajmera is founder and head of research at CrispIdea.

“We decrease our estimate for revenue growth to 14.3% from 19% for FY21 due to China’s low GDP growth. We estimate revenue growth of 10% for FY22 and 12% for FY23. We estimate EPS of RMB 56.19 ($8.87) and RMB 56.59 ($8.93) for FY21 and FY22, respectively.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 16

TICKER COMPANY EPS FORECAST
AMAT Applied Materials $1.85
SAM Boston Beer $2.87
H Hyatt Hotels $-0.08
MGY Magnolia Oil & Gas $0.77
MRO Marathon Oil $0.52
NVDA Nvidia $1.0
TRIP TripAdvisor $-0.04

 

Thursday (February 17)

IN THE SPOTLIGHT: WALMART

Bentonville, Arkansas-based retailer Walmart is expected to report its fourth-quarter earnings of $1.49 per share, which represents year-over-year growth of over 7% from $1.39 per share seen in the same period a year ago.

The multinational retail corporation that operates a chain of hypermarkets would post revenue growth of nearly 1% to $150.91 billion. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.

“Latest AlphaWise data shows Walmart+ membership continues to increase, with ~15m members total (~12% household penetration) & ~1m net members added in the past quarter. Overlap between Walmart+ & Prime remains high; we’ll monitor if this changes with a Prime fee hike coming,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“We expect Walmart (WMT) to sustain recent momentum in its core business in F’22/F’23 and see a growing ability to balance longer-term investments with near-term returns. Our OW rating and $170 PT are underpinned by a preference for 1) quality players with scale and 2) defensive retailers as the market undergoes a mid-cycle transition.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 17

TICKER COMPANY EPS FORECAST
AN AutoNation $4.96
DBX Dropbox $0.2
ROKU Roku $0.01

 

Friday (February 18)

IN THE SPOTLIGHT: DEERE, DRAFTKINGS

DEERE: The world’s largest maker of farm equipment, is expected to report its fiscal first-quarter earnings of $2.28 per share, which represents a year-over-year decline of over 41% from $3.87 per share seen in the same period a year ago. The agricultural, construction and forestry equipment manufacturer would post revenue growth of about 0.5% to $8.09 billion.

“Higher input and freight costs to affect FY22 margins. We downgrade our rating to “Hold” from “Buy” for Deere & Co. and upgrade our TP to $406 for FY23. We derive TP based on non-GAAP EPS to $22.30 & $25.14 for FY22 & FY23, respectively and P/E of ~16.1x for FY23. This provides an upside potential of 8.6% from CMP of $373.79,” noted Shejal Ajmera, Head of Research at Crispidea.

“Following are the reasons for the above assumptions: 1) Strong demand in farm and construction equipment to aid topline; 2) Focus on automation to ensure long term growth and 3) Short term headwinds to affect profitability.”

DRAFTKINGS: The U.S.-focused gambling operator is expected to report its fourth-quarter loss of $0.78 per share, a dime greater than the loss of $0.68 it recorded in the same period a year ago. But the revenue would grow more than 36% to $439.5 million.

“We forecast legal US sports betting & iGaming to increase from <$1.5B in 2019 to $20.6B in 2025 as more states legalize and spend per capita rises. Forecast DKNG to maintain top tier share, 24% in OSB and 21% in iGaming in 2025. Investors question LT profits, but other developed markets have shown 25-30%+ profits for operators at maturity, esp. those with a customer acq. advantage similar to DKNG’s with its DFS database,” noted Thomas Allen, equity analyst at Morgan Stanley.

“Current valuation of 9x 2025e EBITDA does not reflect long-term margins or growth. Upside drivers include signs of profits in mature states, new product innovation and higher market share. Downside risks include higher losses, greater competition and lagging product innovation.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 18

TICKER COMPANY EPS FORECAST
ABR Arbor Realty Trust $0.39
B Barnes Group $0.49
BLMN Bloomin’ Brands $0.52
DE Deere & Co. $2.28

 

Why Marriott Stock Is Up By 4% Today

Marriott Shares Gain Ground As Traders Rush To Buy Hotel Stocks After Recent Panic

Shares of Marriott International gained strong upside momentum today as traders rushed to buy them after Friday’s pullback, which was caused by fears over the new variant of coronavirus.

Other hotel stocks like Hyatt Hotels Corporation or Hilton Worldwide Holdings are also moving higher today, and it looks that traders bet that Friday’s panic was not justified.

Currently, analysts expect that Marriott will report earnings of $2.92 per share in the current year. The company’s profits are expected to jump to $5.36 per share in the next year as the travel sector rebounds from the blow dealt by the pandemic, so the stock is trading at 28 forward P/E, which looks rather expensive even in the current market environment.

What’s Next For Marriott Stock?

Marriott stock will likely remain volatile in the upcoming trading sessions as traders evaluate the risks posed by the new variant of coronavirus.

Before the news on Omicron broke, the stock was trying to gain upside momentum after the pullback from yearly highs. Problems with coronavirus in Europe have already put some pressure on Marriott shares, but it should be noted that the market was willing to focus on the company’s future and ignore high valuation levels.

In case Omicron turns out to be a real threat and countries introduce additional virus containment measures, analysts will have to adjust their forecasts for 2022, which will hurt Marriott stock.

At current valuation levels, Marriott stock price dynamics are mostly dependent on market’s view on the trajectory of the hotel demand rebound. If recovery is postponed due to the spread of the new variant of coronavirus, there is a risk of multiple compression, which will hurt the price of the stock. However, if research shows that current vaccines work well against Omicron, Marriott and other hotel stocks may quickly get back to their previous levels.

For a look at all of today’s economic events, check out our economic calendar.

Marriott Could Offer Profitable Short Sales

Marriott International Inc. (MAR) traded within a few cents of an all-time high on Thursday, defying continued headwinds from pandemic-driven limitations on business and international travel. The stock has gained about 19% in the last five weeks, carving a straight up advance that has cautious technicians scratching their heads. Accumulation has also ticked higher during this period but remains well below the new high posted in March.

Head-Scratching Price Action

The stock dropped like a rock in August after beating Q2 2021 earnings by a wide margin but missing revenue estimates, despite a 115.1% year-over-year increase. It fell 12% into mid-month and turned higher, entering the buying wave that may have ended last week.  That impulse loosely corresponded with the summer’s Delta variant peak but it’s hard to justify the correlation, with airline carriers gaining little ground over the same period.

Head-scratching price action continued through September, with buying pressure picking up after a company presentation that emphasized continued negative impacts on revenue, with a 23% decline in July compared to 2019 levels. That number expanded to 27% in August and there’s little reason to believe it improved considerably in September, with many corporations deferring business travel until the start of 2022, at the earliest.

Wall Street and Technical Outlook

Wall Street consensus has a firmer grasp on reality, with an ‘Overweight’ rating based upon 7 ‘Buy’, 1 ‘Overweight’, 14 ‘Hold’, and 1 ‘Underweight’ recommendation. No analysts recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $130 to a Street-high $180 while the stock will open Monday’s session about $10 above the median $148 target. This placement suggests that Marriott is overvalued at this time.

Marriott topped out at 149.21 in January 2018 and failed a December 2019 breakout after adding just four points. It slid to a 6-year low during 2020’s pandemic decline and turned higher, returning to the prior peak in February 2021. The subsequent breakout added another four points before failing once again, carving a shallow three-year trendline that’s getting tested once again. Given weak technicals and continued headwinds, this looks like a short sale setup with moderate risk, and the potential for a trip toward 130.

For a look at today’s economic events, check out our economic calendar.

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

Weak U.S. Bookings Hurt Marriott Profit, China Shines

By Shreyasee Raj

It is a long road to recovery for Marriott and its smaller rival Hilton, analysts have said, as the hotel operators rely heavily on business travel, which remains weak due to border curbs in many countries.

Marriott, which gets about three quarters of its revenue from the United States and Canada, said its RevPAR, a key measure for a hotel’s top line performance, fell 46.3% in the region, sending its shares down as much as 3.8%.

Greater China was the only market that showed positive occupancy growth as RevPAR surged nearly 77%, while it plunged 80% in Europe, making the continent the worst performing region due to the fresh restrictions that have been imposed.

“While recovery trajectories vary from region to region, the resiliency of demand has been most keenly demonstrated in mainland China, where occupancy is near the pre-pandemic level,” Chief Executive Officer Tony Capuano said.

“Given rising COVID cases and strict restrictions in many countries (in Europe), 25% of the region’s hotels are currently closed,” he told analysts.

Last week, rival Hilton had said Asia, including China, was its only market with positive quarterly occupancy rates and the smallest year-over-year fall in RevPAR.

Marriott, which owns the JW Marriott and Ritz-Carlton brands, said more than 95% of its hotels were open globally.

The hotel operator’s adjusted profit fell 33% to $296 million in the first quarter, below market expectation of $305.6 million, according to IBES data from Refinitiv.

Total revenue halved to $2.32 billion and missed Wall Street estimate of $2.36 billion.

(Reporting by Shreyasee Raj in Bengaluru; Editing by Arun Koyyur)

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.

For a look at all of today’s economic events, check out our economic calendar.

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

Earnings to Watch Next Week: Marriott, Electronic Arts, Alibaba and Walt Disney in Focus

Earnings Calendar For The Week Of May 10

Monday (May 10)

IN THE SPOTLIGHT: MARRIOTT

Marriott International, an American multinational diversified hospitality company, is expected to report its first-quarter earnings of $0.03 per share, which represents a year-over-year decline of over 88% from $0.26 per share seen in the same quarter a year ago.

The U.S. hotel operator’s revenue would slump about 50% to $2.36 billion. However, in the last quarter, the company has delivered an earnings surprise of over 20%.

“Largest hotel brand company globally creates economies of scale, but the spread of COVID-19 will pressure unit growth. With the stock trading near its historical average multiple, we see too wide a risk-reward to justify recommending, with upside/downside driven by how severe and quick business trends return to normal post-COVID-19,” noted Thomas Allen, equity analyst at Morgan Stanley.

Tuesday (May 11)

IN THE SPOTLIGHT: ELECTRONIC ARTS

Electronic Arts, one of the world’s largest video game publishers, is expected to report its fiscal fourth-quarter earnings of $1.04 per share, which represents a year-over-year decline of over 3% from $1.08 per share seen in the same quarter a year ago.

The world’s largest video game publishers would post revenue growth of about 15% to around $1.39 billion. However, in the last four quarters, the company has delivered an earnings surprise of over 500%.

“For the fourth quarter of fiscal 2021, EA expects GAAP revenues of $1.317 billion, cost of revenues to be $302 million, and operating expenses of $837 million. EA anticipates a loss per share of 7 cents for the fourth quarter. Net bookings are expected to be $1.375 billion, which indicates an increase of $75 million over the prior guidance. For fiscal 2021, EA expects revenues of $5.6 billion, cost of revenues to be $1.477 billion, and earnings per share of $2.54,” noted analysts at ZACKS Research.

Wednesday (May 12)

Ticker Company EPS Forecast
WEN Wendy’s $0.15
WIX WIX -$0.68
DT Dynatrace Holdings $0.14
WWW Wolverine World Wide $0.40
LITE Lumentum Holdings Inc $1.42
DOX Amdocs $1.13
JACK Jack In The Box $1.29
GOCO Gocompare.Com $0.00
SONO Sonos Inc -$0.22
PAAS Pan American Silver USA $0.30
MAURY Marui ADR $0.15
TM Toyota Motor $3.67
AEG Aegon $0.17
BRFS BRF $0.02
EBR Centrais Eletricas Brasileiras $0.27
BAYRY Bayer AG PK $0.73
TCEHY Tencent $0.53
DM Dominion Midstream Partners -$0.13
FLO Flowers Foods $0.37

Thursday (May 13)

IN THE SPOTLIGHT: ALIBABA, WALT DISNEY

ALIBABA: China’s Alibaba Group Holding, the largest online and mobile e-commerce company in the world, is expected to report its fiscal fourth-quarter earnings of $1.82 per share, up over 40% from the same quarter a year ago. China’s biggest online commerce company’s revenue to surge more than 70% to $27.7 billion.

“Heightened investments in Taobao Deal and Grocery for user acquisition in less-affluent regions in China, should support long-term growth in core e-commerce business. Merchants’ marketing budgets will continue to shift online given rising reliance on e-commerce and better conversion. Alibaba’s ad resources remain under-monetized,” noted Gary Yu, equity analyst at Morgan Stanley.

“Digitalization trend in China will also sustain AliCloud’s growth potential. Gradual margin expansion will be a long-term profit driver. We see limited near-term catalysts but F22e P/E valuation remains attractive. We also see further downside support from additional disclosure to separate losses from new investments from profitable core e-commerce businesses.”

WALT DISNEY: The world’s leading producers and providers of entertainment and information is expected to report its fiscal second-quarter earnings of $0.27 per share, which represents a year-over-year decline of over 50%. The Chicago, Illinois-based family entertainment company’s revenue would slump over 10% to $ 16.1 billion.

Disney is building content assets that enable it to take advantage of the significant direct-to-consumer streaming opportunity ahead. Disney’s underlying IP remains best-in-class, supporting long-term content monetization opportunities,” noted Benjamin Swinburne, equity analyst at Morgan Stanley.

“During this period of FCF pressure from Parks closures, ESPN’s FCF generation is key to driving down leverage. Historical cycles suggest a potential return to above prior peak US Parks revenues in FY23.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MAY 13

Ticker Company EPS Forecast
CELH Celsius $0.00
HAE Haemonetics $0.69
BABA Alibaba $11.80
BAM Brookfield Asset Management USA $0.87
TAC TransAlta USA $0.06
UTZ Utz Brands $0.15
VERX Vertex Inc. Cl A $0.05
FTCH Farfetch -$0.28
DIS Walt Disney $0.27
AMAT Applied Materials $1.50
DDS Dillards $1.20
VNET 21Vianet -$0.02
TEF Telefonica $0.16
PBR Petroleo Brasileiro Petrobras $0.12
NICE Nice Systems $1.50
TYOYY Taiyo Yuden ADR $2.09
IX Orix $1.97
SGAMY Sega Sammy ADR -$0.02
SOMLY Secom ADR $0.27
OJIPY Oji ADR $1.57
SBS Companhia De Saneamento Basico $0.15

Friday (May 14)

Ticker Company EPS Forecast
MFG Mizuho Financial $0.06
CIG Companhia Energetica Minas Gerais $0.08
HMC Honda Motor $0.41
SMFG Sumitomo Mitsui Financial $0.12
RDY Drreddys Laboratories $0.52

 

U.S. Market Wrap and Forecast for Friday

Major benchmarks sold off at the start of Thursday’s session while a congressional committee debated the implications of last month’s Gamestop Inc. (GME) frenzy. Risk-adverse instruments surged to monthly highs in the first half of the day, shaking out a few weak hands. An afternoon bounce pushed a few points above opening prints but SP-500 Volatility Index (VIX) held firmly in the green into the closing bell.

Mean Reversion

Traders sold many stocks that had rallied to unsustainable price levels, including Tesla Inc. (TSLA), squaring positions ahead of Friday’s options expiration finale. GME and its companions sold off as well, hitting 4-week lows. High yield plays perked up, attracting buying interest for the first time in 2021.  FAANG stocks ticked lower in unison, displaying none of the leadership that generated impressive 2020 returns.

Marriott International (MAR) closed higher despite a 59% year-over-year revenue decline, with executives hoping vaccines translate into a booking resurgence and travel season that keeps hotels from going bankrupt. Fauci said vaccines were reducing COVID-19 infections this morning, which we assumed long before he reached that conclusion. That now needs to translate into baby boomers leaving their caves and spending billions in their favorite destinations this summer.

Friday Expiration

Friday options expiration is often sloppy and uncomfortable, with position squaring more important to the ticker tape than short-term price patterns. Limited exposure makes sense during this period but stocks that have sold off into popular strikes could offer good trade entries into Monday’s options hangover. Twitter Inc. (TWTR) comes to mind in this regard, dropping three or four points this week before bouncing just above the 70 strike.

Home Depot Inc. (HD) highlights next week’s earnings calendar, with the Dow component grinding through the sixth month of a narrow range price pattern. Macy’s Inc. (M) is also on the schedule, shining a light on one of the fallen angels of last month’s Gamestop squeeze. Sadly, M and the mall anchor group have no future, beyond the lipstick put on the pig in recent months, because e-commerce is an unstoppable monster.

For a look at all of today’s economic events, check out our economic calendar.

Marriott Shaking Off Another Bad Quarter

Marriott International Inc. (MAR) is trading marginally lower in the first hour of Thursday’s session after reporting a staggering 59% Q4 2020 revenue decline. The company posted a profit of $0.12 per-share, $0.02 better than estimates, while $2.17 billion revenue missed consensus by more than $200 million. The company noted renewed U.S. and European weakness after a hopeful resurgence in summer bookings, in line with the winter’s brutal second wave.

Pent-up Travel Demand

The hotel chain tried to be upbeat about 2021, indicating they’re seeing early signs the vaccine rollout is bolstering reservations. Of course, that makes perfect sense unless vaccinations slow down or variants keep world citizens afraid of travel. Market watchers will have an opportunity to measure the impact soon because baby boomers with deep pockets are now getting their shots at a rapid pace, ready to unleash pent-up travel demand. Or, at least, that’s the theory.

Executives outlined challenges in the presentation, noting “we have also seen that progress can be slowed by significant spikes in virus cases, such as we saw in the U.S and Europe towards the end of 2020. Global occupancy remained at 35% in Q4, in line with Q3, and still substantially above the trough in April. While no one can know how long this pandemic will last, we are seeing some small, early signs that the acceleration of vaccine rollouts around the world will help drive a significant rebound.”

Wall Street and Technical Outlook

Wall Street consensus is looking ahead to better times, with a ‘Moderate Buy’ rating based upon 4 ‘Buy’ and 6 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $96 to a Street-high $150 while the stock opened Thursday’s session just above the median $128.25 target. Sustained upside is unlikely with this placement until reservations show actual improvement.

The stock topped out in the 140s in the first quarter of 2018 and sold off to 100. A December 2019 breakout attempt failed in February 2020, dumping Marriott to 6-year low in the mid-40s. A fourth quarter advance mounted broken range support, lifting price within seven points of February 2020 price levels in December. Sideways action since that time marks a holding pattern that’s likely to persist until the next positive or negative catalyst hits the travel industry.

For a look at all of today’s economic events, check out our economic calendar.

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

Marriott Q3 Net Income Plunged Over 70% as COVID-19 Pandemic Hurt Bookings

Marriott International, an American multinational diversified hospitality company, said its net income plunged to $100 million in the third quarter as the COVID-19 pandemic affected hotel bookings, sending its shares down about 1% in pre-market trading on Friday.

The U.S. hotel operator said its operating income totalled $252 million, compared to 2019 third-quarter reported operating income of $607 million. Reported net income totalled $100 million in the 2020 third quarter, compared to 2019 third quarter reported net income of $387 million.

Marriott reported diluted earnings per share totalled $0.31 in the quarter, compared to reported diluted EPS of $1.16 in the year-ago quarter.  Third-quarter adjusted diluted EPS totalled $0.06, better than the market expectations of -$0.08 per share.

“The better than expected quarter reflects some key progress toward recovery, which we believe is critical for the next few quarters. Pending commentary on the call, we expect further insights on progress toward near-term and longer-term positioning of the business,” said David Katz, equity analyst at Jefferies, who gave a price target of $125.

“Nonetheless, we expect the Street to focus on the asset-strength in the brand infrastructure and the fees they generate. We expect a neutral to a modestly positive reaction in the shares.”

But Marriott International shares fell about 1% to $99.95 in pre-market trading on Friday; the stock is down about 33% so far this year.

Executive Comments

“During the third quarter, we added more than 19,000 rooms to our system, nearly 70% more than were added in the second quarter, achieving 5% gross rooms growth in the last 12 months. At quarter-end, approximately 228,000 rooms of our more than 496,000-room pipeline were under construction. Progress on projects under construction largely continues apace around the world, although we have designated a slightly higher number of projects on hold given macroeconomic uncertainty and discussions with our owners,” said Arne M. Sorenson, president and chief executive officer of Marriott International.

“For full-year 2020, we now expect 2.5 to 3% net rooms growth, including terminations of 1.5 to 2%. Assuming progress is made in containing COVID-19, we would expect gross room additions in 2021 to accelerate compared to our expectations for 2020,” Sorenson added.

Marriott International Stock Price Forecast

Eleven equity analysts forecast the average price in 12 months at $100.80 with a high forecast of $115.00 and a low forecast of $90.00. The average price target represents a -0.11% decrease from the last price of $100.91. From those 11 analysts, three rated “Buy”, eight rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $93 with a high of $154 under a bull-case scenario and $65 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the lodging company’s stock. Berenberg raises target price to $95 from $81.

Several other analysts have also recently commented on the stock. BMO Capital Markets raised Marriott International to a market perform rating from an underperform and increased their target price to $95 from $83. Citigroup increased their target price to $110 from $95 and gave the company a neutral rating.

Analyst Comments

“Largest hotel brand company globally creates economies of scale, but the spread of COVID-19 will pressure unit growth. We expect several $100M working capital headwinds related to timing mismatches between owners paying Marriott International (MAR) and MAR paying out expenses, but this should be temporary,” said Thomas Allen, equity analyst at Morgan Stanley.

“With the stock trading near its historical avg multiple, we see too wide a risk-reward to justify recommending, with upside/downside driven by how severe and quick business trends return to normal post-COVID-19.”

Check out FX Empire’s earnings calendar

Stock Pick Update: September 2 – September 8, 2020

The broad stock market has extended its medium-term uptrend in the last five trading days (August 26 – September 1). The S&P 500 index has set new record high of 3,528.03 on Tuesday, as it further extended its rally after breaking above February 19 high of 3,393.52. Five months ago on March 23, the market sold off to new medium-term low of 2,191.86. It was a stunning 35.4% below February 19 record high of 3,393.52. The corona virus and economic slowdown fears erased more than a third of the broad stock market value. But since then stocks rallied 61.0%.

The S&P 500 index has gained 2.22% between August 26 and September 1. In the same period of time our five long and five short stock picks have gained 1.03%. So stock picks were relatively weaker than the broad stock market. Our long stock picks have gained 2.02% and short stock picks have resulted in a small gain of 0.04%.

There are risks that couldn’t be avoided in trading. Hence the need for proper money management and a relatively diversified stock portfolio. This is especially important if trading on a time basis – without using stop-loss/ profit target levels. We are just buying or selling stocks at open on Wednesday and selling or buying them back at close on the next Tuesday.

If stocks were in a prolonged downtrend, being able to profit anyway, would be extremely valuable. Of course, it’s not the point of our Stock Pick Updates to forecast where the general stock market is likely to move, but rather to provide you with stocks that are likely to generate profits regardless of what the S&P does.

This means that our overall stock-picking performance can be summarized on the chart below. The assumptions are: starting with $100k, no leverage used. The data before Dec 24, 2019 comes from our internal tests and data after that can be verified by individual Stock Pick Updates posted on our website.

Below we include statistics and the details of our three recent updates:

  • September 1, 2020
    Long Picks (August 26 open – September 1 close % change): FIS (+4.53%), MAR (+4.82%), DISH (+1.59%), PXD (-2.85%), WEC (+2.02%)
    Short Picks (August 26 open – September 1 close % change): PSX (-4.28%), D (-0.35%), ANTM (-1.31%), AAPL (+6.34%), HD (-0.62%)Average long result: +2.02%, average short result: +0.04%
    Total profit (average): +1.03%
  • August 25, 2020
    Long Picks (August 19 open – August 25 close % change): VFC (+3.87%), IBM (-0.15%), CAT (+1.91%), CVX (-1.34%), SCHW (+1.72%)
    Short Picks (August 19 open – August 25 close % change): WMB (-2.11%), TROW (-1.15%), XEL (-1.84%), HD (-0.46%), AAPL (+7.62%)Average long result: +1.20%, average short result: -0.41%
    Total profit (average): +0.40%
  • August 18, 2020
    Long Picks (August 12 open – August 18 close % change): BA (-7.49%), SCHW (-1.55%), CXO (-4.91%), BXP (-5.58%), MSI (+5.14%)
    Short Picks (August 12 open – August 18 close % change): CCI (+1.85%), AAPL (+4.58%), CHTR (+3.33%), ROP (+0.48%), SPGI (+3.65%)Average long result: -2.88%, average short result: -2.78%
    Total profit (average): -2.83%

Let’s check which stocks could magnify S&P’s gains in case it rallies, and which stocks would be likely to decline the most if S&P plunges. Here are our stock picks for the Wednesday, September 2 – Tuesday, September 8 period.

We will assume the following: the stocks will be bought or sold short on the opening of today’s trading session (September 2) and sold or bought back on the closing of the next Tuesday’s trading session (September 8).

We will provide stock trading ideas based on our in-depth technical and fundamental analysis, but since the main point of this publication is to provide the top 5 long and top 5 short candidates (our opinion, not an investment advice) for this week, we will focus solely on the technicals. The latter are simply more useful in case of short-term trades.

First, we will take a look at the recent performance by sector. It may show us which sector is likely to perform best in the near future and which sector is likely to lag. Then, we will select our buy and sell stock picks.

There are eleven stock market sectors: Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Technology, Communications Services, Utilities and Real Estate. They are further divided into industries, but we will just stick with these main sectors of the stock market.

We will analyze them and their relative performance by looking at the Select Sector SPDR ETF’s.

Based on the above, we decided to choose our stock picks for the next week. We will choose our top 3 long and top 3 short candidates using trend-following approach, and top 2 long and top 2 short candidates using contrarian approach:

Trend-following approach:

  • buys: 1 x Technology, 1 x Communication Services, 1 x Consumer Discretionary
  • sells: 1 x Utilities, 1 x Energy, 1 x Real Estate

Contrarian approach (betting against the recent trend):

  • buys: 1 x Utilities, 1 x Energy
  • sells: 1 x Technology, 1 x Communication Services

Trend-following approach

Top 3 Buy Candidates

CSCO Cisco Systems, Inc. – Technology

  • Possible short-term bottoming pattern along $42
  • The resistance level of $45
  • The support level is at $40

DIS Walt Disney Co. – Communication Services

  • Stock remains above month-long upward trend line
  • Possible uptrend continuation
  • The resistance level of $135.0
  • The support level is at $127.5

MAR Marriott Intl Inc New – Consumer Discretionary

  • Stock fluctuates after breaking above short-term downward trend line
  • The resistance level and an upside profit target level is at $115, marked by previous high

Summing up, the above trend-following long stock picks are just a part of our whole Stock Pick Update. The Technology, Communication Services and Consumer Discretionary sectors were relatively the strongest in the last 30 days. So that part of our ten long and short stock picks is meant to outperform in the coming days if the broad stock market acts similarly as it did before.

We hope you enjoyed reading the above free analysis, and we encourage you to read today’s Stock Pick Update – this analysis’ full version. There, we include the stock market sector analysis for the past month and remaining long and short stock picks for the next week. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today.

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Marriott International Posts Bigger Q2 Loss as COVID-19 Hurts Demand; Target Price $108

Marriott International, an American multinational diversified hospitality company, reported a higher-than-anticipated loss in the second quarter as the COVID-19 pandemic halted international travel, with more cancellations on hotel bookings, sending it shares down about 3% in premarket trading.

The U.S. hotel operator said its second-quarter reported net loss totalled $234 million, compared to reported net income of $232 million in the year-ago quarter and reported diluted loss per share totalled $0.72, compared to reported diluted EPS of $0.69 a year earlier.

“The mixed quarterly results are likely less significant than the commentary around the improving operating environment, both of which should drive a neutral to modestly positive reaction in the shares,” said David Katz, equity analyst at Jefferies.

“We expect the evolving operating model and its interrelationship with a lower visibility demand environment to be the key driver of the shares and valuation going forward.”

Marriott said it has reopened 91% of its worldwide hotels, compared with 74% in April. On an adjusted basis, the leading lodging company reported a loss of 64 cents per share in the second quarter ended June 30, bigger than analysts’ expectation of a loss of 42 cents per share, according to IBES data from Refinitiv, Reuters reported.

The U.S. hotel operator said its second-quarter 2020 comparable systemwide constant dollar RevPAR declined 84.4% worldwide, 83.6% in North America and 86.7% outside North America. Total revenue plunged 72.4% to $1.46 billion, missing estimates of $1.68 billion.

At the time of writing, Marriott International shares traded 2.3% higher at $95.95, still down about 40% since the start of the year.

Executive comment

“While our business continues to be profoundly impacted by COVID-19, we are seeing steady signs of demand returning. Worldwide occupancy rates, which bottomed at 11% for the week ended April 11, have improved each week, reaching nearly 34% for the week ended August 1,” Arne M. Sorenson, president and chief executive officer of Marriott International, said.

“Greater China continues to lead the recovery. While the full recovery from COVID-19 will clearly take time, the current trends we are seeing reinforce our view that when people feel safe travelling, demand returns quickly.”

Marriott stock forecast

Eleven analysts forecast the average price in 12 months at $97.30 with a high forecast of $148.00 and a low forecast of $74.00. The average price target represents a 3.51% increase from the last price of $94.00. From those 11, three analysts rated ‘Buy’, seven analysts rated ‘Hold’ and one rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $88 with a high of $149 under a bull scenario and $56 under the worst-case scenario. Evercore ISI raised the target price to $120 from $101 and Suntrust Robinson raised price target to $88 from $86.

Several other equity analysts have also updated their stock outlook. Marriott International had its price target decreased by Wells Fargo & Co to $108 from $127. The firm currently has an “overweight” rating on the stock. Barclays raised boosted their price target for the company to $105 from $92.

Analyst comment

“Largest hotel brand company globally creates economies of scale, but the spread of COVID-19 will pressure unit growth. We expect several $100M working capital headwinds related to timing mismatches between owners paying MAR and MAR paying out expenses, but this should be temporary,” said Thomas Allen, equity analyst at Morgan Stanley.

“With the stock trading near its historical avg multiple, we see too wide a risk-reward to justify recommending, with upside/downside driven by how severe and quick business trends return to normal post-COVID-19,” the analyst added.

Marriott Likely To Trade Lower In The Second Half

Marriott International Inc. (MAR) has been hit hard by the coronavirus pandemic, with business travel worldwide grinding to a virtual halt.  Q1 2020 results released in early May reaffirmed those headwinds, missing profit estimates by a wide margin while revenue dropped 6.6% year-over-year to $4.68 billion. The company also filed a $0.42 per-share ‘impairment charge’, driven by heavy borrowing, bad debt expense, and guarantee reserves.

The lodging giant is highly-levered to the travel industry, which probably won’t recover to pre-pandemic levels for at least one to two years. The European Commission highlighted this sobering reality last week, suggesting it won’t permit American travelers due to a massive spike in infections. In addition, corporations worldwide are growing comfortable with virtual meeting spaces and may find it hard to resume the cost burden of sending employees on the road.

Marriott Bull Expects Rapid Recovery

Not everyone is bearish on Marriott at this time. For example, Barclay’s analyst Anthony Powell upgraded the stock from ‘Equal Weight’ to ‘Overweight’ last week, stating “in the near term, these companies should benefit from improving demand trends for U.S. select-service hotels and resort destinations; next year, the companies should more fully price in a return of corporate and group travel.” Even so, he admits that COVID-19 remains an unknown and ‘major hurdle’.

Wall Street And Technical Outlook

Broad analyst consensus is more cautious than Barclays, with just 3 ‘Buy’ recommendations, 12 ‘Hold’ recommendations, and 1’Sell’ recommendation.  Price targets currently range from a low of $74 to a street high $148, while the stock is now trading nearly $13 below the median $93 target. This weak placement indicates that investors remain skeptical about the long-term outlook, keeping their powder dry until macro conditions sound the ‘all-clear’ signal.

Marriott incurred heavy technical damage in the first quarter swoon and has failed to remount broken support levels during the three-month recovery wave. Committed sellers are getting more aggressive due to spiking COVID-19 cases in more than half of the American states, shining a highly bearish light on the travel industry.  The stock is unlikely to overcome these adverse conditions in the second half of 2020, raising fears it will eventually re-test the deep March low.