After announcing the acquisition of Apple Leisure Group in August, the shares of Hyatt Hotels (NYSE: H) gained 20% in value – reaching almost pre-Covid levels. Over the past few years, the company has been expanding its management & franchise business as a part of its asset-light growth strategy. Per annual filings, the company’s Americas, Asia Pacific, and Europe & Africa segments account for 66%, 20%, and 14% of the 235,272 room portfolio, respectively. Notably, the company’s domestic operations contribute around 80% of total revenues and earnings. While room occupancy rates have remained low across geographies due to the pandemic, Trefis believes that strong domestic demand is likely to lift the top line of Hyatt Hotels in the coming quarters. We highlight the quarterly trends in revenues, earnings, stock price, and expectations for Q3 2021 in an interactive dashboard analysis, Hyatt Hotels Earnings Preview.
How did Hyatt Hotels perform in the second quarter?
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Hyatt Hotels’ second-quarter revenues observed a strong 165% (y-o-y) growth assisted by improving occupancy rates and room rents in the U.S. The company incurred just $9 million of net loss and reported $55 million of quarterly adjusted EBITDA, which turned positive for the first time during the pandemic. On the operational front, the system-wide room occupancy rate reached 48% (i.e., nearly half of Hyatt’s rooms were occupied) and average room rent stood just 20% below pre-pandemic levels.
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Last month, Hyatt Hotels (NYSE: H) announced the acquisition of Apple Leisure Group to expand its management & franchise business. As a part of the asset-light strategy, the company has been divesting its owned properties and entering into management service contracts. The company has extended its divestiture plan to repay the debt raised to fund this acquisition. Nearly 80% of Hyatt’s earnings are likely to be contributed by the management & franchise business by 2024. Comparing this with a 67% contribution targeted for 2022 – the company seems to be aggressive with its strategy. Thus, Trefis believes that the stock is a good pick for long-term gains as highlighted in our interactive dashboard on Hyatt Hotels Valuation. However, according to our machine learning engine, which identifies trends in the company’s historical stock price data, Hyatt stock will likely gain just 0.5% over the next one month (twenty-one trading days) considering the 4.3% growth in the past week (five trading days).
But how would these numbers change if you are interested in holding Hyatt stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test Hyatt Hotels stock price forecast. You can test the chance of a gain over different time intervals of a quarter, month, or even just one day!
MACHINE LEARNING ENGINE – try it yourself:
IF H stock moved by -5% over five trading days, THEN over the next twenty-one trading days, H stock moves an average of 3.6 percent, with a 64.5% probability of a positive return over this period.
Also, given a -5% movement for the stock over five trading days, it has historically witnessed an excess return of 1.1% compared to the S&P500 over the next 21 trading days, with a 48% percent probability of a positive excess return.
Some Fun Scenarios, FAQs & Making Sense of Hyatt Hotels Stock Movements:
Question 1: Is the price forecast for Hyatt Hotels stock higher after a drop?
Answer: Consider two situations,
Case 1: Hyatt Hotels stock drops by -5% or more in a week
Case 2: Hyatt Hotels stock rises by 5% or more in a week
Is the price forecast for Hyatt Hotels stock higher over the subsequent month after Case 1 or Case 2?
H stock fares better after Case 1, with an expected return of 3.5% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an expected return of 1.4% for Case 2. This implies a price forecast of $81 in Case 1 and a figure of $80 in Case 2 using H market price of $78.63 on 9/30/2021.
In comparison, the S&P 500 has an expected return of 3.1% over the next 21 trading days under Case 1, and an expected return of just 0.5% for Case 2 as detailed in our dashboard that details the expected return for the S&P 500 after a rise or drop.
Question 2: Does patience pay?
Answer: If you buy and hold Hyatt Hotels stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.
Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!
For H stock, the returns over the next N days after a -5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:
You can try the engine to see what this table looks like for Hyatt Hotels after a larger loss over the last week, month, or quarter.
Question 3: What about the stock price forecast after a rise if you wait for a while?
Answer: The expected return after a rise is understandably lower than after a drop as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.
H’s returns over the next N days after a 5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:
It’s pretty powerful to test the trend for yourself for Hyatt Hotels stock by changing the inputs in the charts above.
What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since 2016.