3 Overvalued Hotel Stocks to Avoid in February

The global hotel industry has suffered significant losses during the pandemic, as the hospitality industry is one of the worst-hit sectors. Many businesses were compelled to shut down over the past two years, causing thousands to lose their jobs. Moreover, the recent omicron spread squashed the minor recovery made by the hotel industry early last year.

Given the rapid mutation capabilities of the virus, it is difficult to predict when the pandemic will end. Moreover, with surging geopolitical tensions, international travel is expected to remain low in the near term.

Given this backdrop, it might be prudent to avoid significantly overvalued hotel stocks Marriott International, Inc. (MAR), Hilton Worldwide Holdings Inc. (HLT), and Hyatt Hotels Corporation (H) now. Wall Street analysts expect these stocks to slump in the near term.

Marriott International, Inc. (MAR)

MAR operates, franchises, and licenses hotel, residential, and timeshare properties worldwide. Its segments include U.S. and Canada; and International. Currently, the company operates around 7,989 properties under 30 hotel brands in 139 countries and territories.

MAR’s total revenues increased 104.7% year-over-year to $4.45 billion for the fiscal fourth quarter ended December 31, 2021. However, its total expenses came in at $3.81 billion, compared to $2.30 billion in the previous period. Moreover, its net gains and other income decreased 33.3% year-over-year to $4 million. Its interest income also fell 14.3% year-over-year to $6 million.

In terms of forward EV/S, MAR’s 3.57x is 175.6% higher than the industry average of 1.30x. Moreover, its forward P/S of 3.05x is 184.3% higher than the industry average of 1.07x.

MAR closed yesterday’s trading session at $178.17. Moreover, Wall Street analysts expect the stock to hit $177.58 in the near term, which indicates a potential marginal decline.

MAR’s POWR Ratings reflect its poor prospects. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

The stock has a D grade for Value. Click here to access the additional POWR Ratings for MAR (Momentum, Growth, Stability, Sentiment, and Quality). MAR is ranked #8 of 21 stocks in the D-rated Travel - Hotels/Resorts industry.

Hilton Worldwide Holdings Inc. (HLT)

HLT, a hospitality company, owns, leases, manages, develops, franchises hotels and resorts. It operates through two segments, Management and Franchise, and Ownership, and has around 6,800 properties with 1 million rooms in 122 countries and territories.

HLT’s total revenues increased 106.3% year-over-year to $1.84 billion for the fourth quarter ended December 31, 2021. However, its total expenses came in at $1.50 billion, compared to $1.08 billion for the prior period. Also, its net other non-operating income decreased 61.1% year-over-year to $7 million.

In terms of forward EV/S, HLT’s 6.41x is 395.2% higher than the industry average of 1.30x. Moreover, its forward P/S of 5.36x is higher than the industry average of 1.07x by 400.3%.

HLT missed its EPS estimates in three of the trailing four quarters. It lost 1.9% year-to-date to close yesterday’s session at $153.04. Also, Wall Street analysts expect the stock to hit $150.69 in the near term, which indicates a potential decline of 1.5%.

HLT’s POWR Ratings reflect its poor prospects. The stock has a D grade for Value.

We’ve also rated it for Growth, Momentum, Stability, Sentiment, and Quality. Click here to access all the HLT ratings. It is ranked #12 in the same industry.

Hyatt Hotels Corporation (H)

H operates as a hospitality company in the United States and internationally. It operates through four segments: Owned and Leased Hotels; Americas Management and Franchising; ASPAC Management and Franchising; and EAME/SW Asia Management and Franchising. 

H’s total revenues increased 153.8% year-over-year to $1.08 billion for the fourth quarter ended December 31, 2021. However, its other direct costs increased 226.7% year-over-year to $49 million. Its other loss came in at $53 million, compared to an income of $22 million in the year-ago period.

In terms of forward EV/Sales, H’s 2.08x is higher than the industry average of 1.30x by 60.7%. Also, its forward P/S of 1.97x is 84.2% higher than the industry average of 1.07x.

H missed the EPS estimates in three of the trailing four quarters. It closed yesterday’s trading session at $102.10. Wall Street analysts expect the stock to hit $97.47 in the near term, which indicates a potential decline of 4.5%.

H’s POWR Ratings are consistent with this bleak outlook. The stock has an overall D rating equating to Sell in our POWR Ratings system. It has a D grade for Value, Stability, and Sentiment.

We also have graded H for Growth, Momentum, and Quality. Click here to access all of H’s ratings. H is ranked #18 in the same industry.

MAR shares were trading at $175.93 per share on Friday afternoon, down $2.24 (-1.26%). Year-to-date, MAR has gained 6.47%, versus a -8.63% rise in the benchmark S&P 500 index during the same period.

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.

More...