Goldman Sachs has initiated coverage on Hilton Worldwide Holdings Inc. (NYSE: NYSE:HLT) with a positive outlook, assigning a Buy rating and setting a price target of $245.
The investment firm foresees a 13% total return to its price target over the next 12 months, driven by several growth factors for the hotel corporation.
The analyst from Goldman Sachs highlighted Hilton's status as a high-quality lodging corporation with a strong potential for growth. Despite the general deceleration in global revenue per available room (revPAR), Hilton is expected to show resilience compared to its peers due to its high mix of franchise fees and lower exposure to macro-sensitive international markets and China.
The report also points out Hilton's leading position in supply growth within the industry. The company boasts the highest pipeline as a percentage of the existing supply mix among its competitors.
This has been achieved through strategies such as conversion activity, partnerships, and selective mergers and acquisitions. Furthermore, the new brands Hilton has introduced are considered high quality and are expected to be accretive rather than dilutive to fees per room.
In other recent news, Hilton Worldwide Holdings Inc. has announced the offering of $1 billion in senior notes due 2033, with the proceeds earmarked for general corporate purposes. The significant debt offering is expected to be completed on September 9, 2024, subject to customary closing conditions. Additionally, Hilton reported an adjusted EBITDA of $917 million for the second quarter and a year-over-year increase in net unit growth of 6.1%.
Despite a softer macro environment and a revision in its full-year revenue per available room (RevPAR) guidance, Hilton maintains a positive outlook. The company's portfolio has expanded beyond 8,000 hotels, and Hilton projects full-year net unit growth of 7% to 7.5%.
This growth is fueled by strategic acquisitions, partnerships, and strong performance in the Europe, Middle East, Africa (EMEA), and Asia Pacific (APAC) regions.
InvestingPro Insights
Goldman Sachs' positive outlook on Hilton Worldwide Holdings Inc. (NYSE:HLT) is further supported by key metrics and insights from InvestingPro. With a robust market capitalization of $54.31 billion and a high gross profit margin of 75.38% over the last twelve months as of Q2 2024, Hilton demonstrates strong financial health and efficiency in its operations. Additionally, the company's aggressive share buyback strategy, as noted in InvestingPro Tips, suggests a confident management stance on the company's valuation and future prospects.
While Hilton's P/E ratio stands at 46.22, indicating a premium valuation, the company's impressive gross profit margins and a forecast for profitability this year provide a foundation for potential investment upside. Moreover, the stock's low price volatility offers a degree of stability for investors. It is important to note, however, that Hilton's short-term obligations currently exceed its liquid assets, signaling a need for careful financial management in the immediate future.
Investors looking for additional insights on Hilton can find more InvestingPro Tips, including detailed analyses of the company's debt levels, valuation multiples, and stock performance relative to its 52-week high. For those interested in a deeper dive, there are 14 additional InvestingPro Tips available at https://www.investing.com/pro/HLT.
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