Canaccord Genuity favors stocks that have material embedded same-store growth, whether that be out-performance on the top-line such as Strategic Hotels & Resorts, Inc. (NYSE: BEE) and Ashford Hospitality Trust, Inc. (NYSE: AHT) or on the margin front as with Diamondrock Hospitality Co. (NYSE: DRH), and those that are somewhat misunderstood like Starwood Hotels & Resorts Worldwide Inc. (NYSE: HOT).
With a relatively benign supply growth outlook and Canaccord Genuity’s expectation of continued, economic growth, the firm believes the recent sell-off is another head fake. Despite the expectation for interest rates to continue their upward trend, Canaccord Genuity’s work suggests that as long as that trend continues to be supported by economic growth, the lodging stocks will perform well, and the recent pull-back on rate concerns is an exceptional entry point, especially for the Lodging REITs.
Canaccord Genuity analyst Ryan Meliker said :
We believe that the recent pullback across the Lodging sector (REITs down 11% from their January peak and C-corps down 7% from their April peak) has created a compelling entry point as we see at least another 18 months remaining in this lodging up-cycle. We have seen head fakes regarding interest rates and macro uncertainty in recent years that have led to material sell-offs, but in each of those instances, the stocks recovered quickly.
The brokerage firm initiated the following ratings for these companies:
- Strategic has a Buy rating with a $15 price target.
- Ashford has a Buy rating with a $12 price target.
- Diamondrock has a Buy rating with a $16 price target.
- Starwood has a Buy rating with a $93 price target.
Shares of Starwood were up 1.5% at $83.69 on Tuesday afternoon. The stock has a consensus analyst price target of $90.71 and a 52-week trading range of $68.53 to $87.99.
Ashford shares were up 1% at $9.14 on a 52-week trading range of $7.77 to $11.36. The stock has a consensus analyst price target of $11.63.
Shares of Strategic were up 1.2% at $12.95 on a 52-week trading range of $11.01 to $14.26. The stock has a consensus analyst price target of $14.56.
Diamondrock shares were up 0.8% at $13.49. The stock has a consensus analyst price target of $15.17 and a 52-week trading range of $12.15 to $16.01.
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