On Wednesday, HSBC has increased the price target on Hilton Worldwide (NYSE:HLT) shares to $254 from the previous $219, while maintaining a Buy rating on the stock. The financial institution's analyst cites durable long-term growth drivers, including recent strategic partnerships and a brand acquisition, as the basis for the adjustment.
The analyst believes that Hilton's dynamic commercial strategies are effectively capitalizing on brand loyalty, which is expected to benefit the company's development, pricing, and distribution. The new price target represents a 20.7% potential upside from the stock's current position.
This revision reflects a forward-looking approach, shifting the focus from the 2024 estimated values to the 2025 expected adjusted enterprise value to EBITDA (earnings before interest, taxes, depreciation, and amortization) multiple, which includes stock-based compensation.
HSBC's valuation of Hilton is based on a 20.5 times adjusted EV/EBITDA multiple, consistent with the company's five-year average and its current trading multiple. The firm's stance is that Hilton's shares are currently trading attractively, with an EV/EBITDA to three-year compound annual growth rate (CAGR) of 1.7 times, which is more favorable than the peer average of 2.0 times.
The outlook for Hilton reflects confidence in the company's ability to sustain growth and monetize its brand loyalty effectively. The revised price target is indicative of HSBC's positive view of Hilton's strategic initiatives and their anticipated impact on the company's financial performance.
InvestingPro Insights
Following HSBC's updated outlook on Hilton Worldwide (NYSE:HLT), InvestingPro data offers additional insights into the company's financial health and market performance. Hilton's impressive gross profit margin of 74.12% in the last twelve months as of Q4 2023 underscores the company's effective cost management and robust pricing strategies. Despite trading at a high earnings multiple with a P/E ratio of 48.47, the company's stock has demonstrated low price volatility, suggesting investor confidence in its stability.
Hilton's strong return over the last year, with a 51.29% price total return, aligns with the positive sentiment expressed by HSBC. Additionally, the stock is trading near its 52-week high at 97.49% of the peak price, reflecting sustained investor interest. For readers looking to delve deeper into Hilton's prospects, there are 15 additional InvestingPro Tips available, detailing various facets of the company's financials and market performance. To explore these insights, visit InvestingPro and consider using the exclusive coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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