Hilton Worldwide (HLT) PT Raised to $235 at Baird

Baird analyst Michael Bellisario raised the price target on Hilton Worldwide (NYSE: HLT) to $235.00 (from $215.00) while maintaining a Outperform rating.

The analyst commented: "We continue to have a favorable view of Hilton's business model and longer-term growth prospects; however, with HLT trading at 30x P/E (2025E), earnings upside is needed over the near term to sustain the momentum, in our opinion. HLT shares are trading at the high end of their historical range (ex-pandemic) and an approximate 4-turn premium versus MAR (ex-pandemic), which is a historically wide spread. Noteworthy is that labor strikes have occurred/are occurring at managed hotels across the United States since the beginning of September. Union workers are striking at six hotels currently in Boston, San Francisco, Seattle, and Waikiki, four of which are experiencing "indefinite" strikes. Labor disputes are disruptive, particularly to large group events/ bookings, and the longer a strike lasts, the greater the financial impact (more so to the owner than the manager). The most impactful strikes have been at the 1,190-room Hilton San Diego Bayfront and the 2,860-room Hilton Hawaiian Village, which we estimate generates $25-$30 million of annual base management and incentive management fees for Hilton. Our enthusiasm and bullishness is tempered as a result of (1) a relatively sluggish (but still positive) RevPAR growth outlook, (2) expected near-term disruption from the recent/ongoing labor strikes across many of Hilton's managed hotels (our model reflects modestly reduced fees in 2H24), and (3) valuation that is at/above absolute and relative highs, particularly in light of the business performing plus/minus in line with its longer-term growth algorithm."

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