Jefferies Downgrades Choice Hotels (CHH) to Hold

Jefferies analyst David Katz downgraded Choice Hotels (NYSE: CHH) from Buy to Hold with a price target of $150.00.

The analyst comments: "We are downgrading to Hold from Buy given that CHH has rerated post the WH deal pursuit and the valuation appears appropriately balanced. The core limited service/economy franchising business is solid, while upscale is earlier stage, which give us little reason to push the target higher, leaving modest upside. In short, the valuation hierarchy in the group (CHH-14X EBITDA vs. larger peers 12-18X) is now sensibly placed.

Our reasons for the downgrade. First, growth is lower than larger players (+31% avg. EBITDA vs. CHH +8.3%, 16-18% EPS vs. CHH 9%). More critical, in our view, is FCF yield for asset light businesses that are driven by capital returns, also compare unfavorably (CHH-4.7% yield vs. 6.6% for closest peers) based on 2025 estimates. In total, with the shares trading at 14.1X 2025E EBITDA and the closest peer at 12.3X and larger peers at 15.7X-18.1X with higher growth rates, we believe a more measured approach is appropriate."

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 $139.46 yesterday.

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