Starwood (HOT) Remains Undervalued Amid Expanding Margins - Barron's
Tweet
Share
E-mail
Get Alerts HOT Hot Sheet
Join SI Premium – FREE
Shares of Starwood Hotels & Resorts (NYSE: HOT) are outpacing peers Monday following a bullish Barron's report over the weekend.
Barron's highlights Starwood's transition from being a hotel owner, to drawing the majority of its revenue -- about 57 percent -- from managing hotels owned by other companies but operating under Starwood brands. The number is up from just 16 percent 10 years ago.
Starwood also has a goal of getting 80 percent of operating earnings from fees, which Barron's thinks its well on its way to achieving. Starwood currently manages or franchises 998 active hotels, with 350 in the pipeline. By contrast, Starwood only owns 60 hotels.
Hotel stocks, including Starwood, have been hit hard recently on the global economic slump and a potentially looming recession. Shares of Starwood are about 32 percent lower on the year. Barron's notes some investors are cautious about Starwood's ability to sell properties in this environment as investors and corporations begin to clamp down, and REITs have also been hit hard in 2011.
Barron's contends Starwood's luxury and boutique niche and potential expansion into emerging markets hint that there is an opportunity to grab up a premier hotel owner and operator at a discount price.
One analyst sees Starwood getting up to $81, about double the stock's current price, translating to a market cap of about $15 billion. He cites Starwood's loyalty program, strong brand, and market network as just a few key elements Starwood has going for it.
Another sees Starwood with a multiple of 14x fiscal 2012 cash flow, making shares worth $75. Given a slowdown in travel, that multiple could drop to 12x, still amounting to $65 per share.
Barron's notes sale prices on full-service hotels this year indicated a per room average of $425,000, meaning Starwood's 60 properties are valued at about $8.2 billion, well above it's market value.
Starwood is aiming for free cash flow of about $1 billion, up from $879 million in 2010. Earnings are expected to be $1.67 to $1.77 per share. Starwood sees increases in room rates as a driver for more profitability in 2011 and into 2012, though unrest in Africa and the Middle East has cut into free cash flow recently.
In China, Starwood operates 75 hotels, with another 100 under construction. Barron's notes the measure is being made in order to take advantage of China's booming travel industry, which is increasing at the rate of 15 to 20 percent annually.
Starwood shares are up nearly 7 percent Monday.
Barron's highlights Starwood's transition from being a hotel owner, to drawing the majority of its revenue -- about 57 percent -- from managing hotels owned by other companies but operating under Starwood brands. The number is up from just 16 percent 10 years ago.
Starwood also has a goal of getting 80 percent of operating earnings from fees, which Barron's thinks its well on its way to achieving. Starwood currently manages or franchises 998 active hotels, with 350 in the pipeline. By contrast, Starwood only owns 60 hotels.
Hotel stocks, including Starwood, have been hit hard recently on the global economic slump and a potentially looming recession. Shares of Starwood are about 32 percent lower on the year. Barron's notes some investors are cautious about Starwood's ability to sell properties in this environment as investors and corporations begin to clamp down, and REITs have also been hit hard in 2011.
Barron's contends Starwood's luxury and boutique niche and potential expansion into emerging markets hint that there is an opportunity to grab up a premier hotel owner and operator at a discount price.
One analyst sees Starwood getting up to $81, about double the stock's current price, translating to a market cap of about $15 billion. He cites Starwood's loyalty program, strong brand, and market network as just a few key elements Starwood has going for it.
Another sees Starwood with a multiple of 14x fiscal 2012 cash flow, making shares worth $75. Given a slowdown in travel, that multiple could drop to 12x, still amounting to $65 per share.
Barron's notes sale prices on full-service hotels this year indicated a per room average of $425,000, meaning Starwood's 60 properties are valued at about $8.2 billion, well above it's market value.
Starwood is aiming for free cash flow of about $1 billion, up from $879 million in 2010. Earnings are expected to be $1.67 to $1.77 per share. Starwood sees increases in room rates as a driver for more profitability in 2011 and into 2012, though unrest in Africa and the Middle East has cut into free cash flow recently.
In China, Starwood operates 75 hotels, with another 100 under construction. Barron's notes the measure is being made in order to take advantage of China's booming travel industry, which is increasing at the rate of 15 to 20 percent annually.
Starwood shares are up nearly 7 percent Monday.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Walmart (WMT) PT Lowered to $130 at UBS on Investment Narrative's Competing Dynamics
- Morgan Stanley course-corrects their semiconductor equipment outlook on demand
- Intchains Group Ltd (ICG) PT Lowered to $2 at Benchmark Following 1H Results
Create E-mail Alert Related Categories
Insiders' BlogRelated Entities
Barron's, EarningsSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
