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.