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UPDATE: UBS Downgrades Choice Hotels (CHH) to Sell

June 23, 2015 6:43 AM EDT
Get Alerts CHH Hot Sheet
Price: $126.35 -1.21%

Rating Summary:
    3 Buy, 15 Hold, 4 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 13 | Down: 11 | New: 11
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(Updated - June 23, 2015 1:16 PM EDT)

UBS downgraded Choice Hotels (NYSE: CHH) from Neutral to Sell with a price target of $51.00 (from $58.00). Analyst Robin M. Farley called its multiple "stretched" and pointed out decelerating RevPAR.

"While a pure franchise model is typically a more defensive segment in an otherwise cyclical business, we are more sensitive to valuation this late in the lodging cycle and believe stretching valuations at this point in the cycle offers an unfavourable risk-reward," said Farley.

"CHH is currently trading at 16x on '15E EV/EBITDA and ~15x 2016E, well above the 3-, 5- and 10-year lodging industry average multiple of 12-13x and CHH's multiple of 13-14x. CHH may continue to trade at a premium, particularly as the economy segment continues to outperform overall US RevPAR growth (Economy RevPAR up +8.7% vs overall US RevPAR up +8.3% in 2014 and YTD '15 Economy up +8.1% vs overall US +7.2%), but we feel it is difficult to defend CHH's significant premium," added the analyst.

For an analyst ratings summary and ratings history on Choice Hotels click here. For more ratings news on Choice Hotels click here.

Shares of Choice Hotels closed at $56.44 yesterday.



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