Without a question, the coronavirus pandemic had an outsized impact on the leisure and tourism industries. Due to the drop in demand, hotels saw a drop in revenue and occupancy.
Lately, the progressive easing of lockdowns and the successful vaccination rollout have improved attitudes toward travel. Marriot Vacations (VAC), located in Florida, is one company that is well-positioned to benefit from this trend, due to its sole emphasis on leisure tourists.
The vacation company has risen about 71% over the past year, and more than 22% on a year-to-date basis.
Marriot Vacations has shown indications of recovering from the pandemic and returning to dividends and share repurchases.
Recently, Marriot Vacations reinstated a $0.54 per share dividend payment and announced a stock repurchase program worth up to $250 million. Furthermore, the firm stated that most of its resorts continue to have strong occupancy rates, demonstrating people’s willingness to take vacations.
These developments should enhance investor confidence, causing the stock price to rise to new highs.
On the flip side, Marriot Vacations reported a slight rise in cancellations as a result of the Delta variation and fires near Lake Tahoe. As a result, it now anticipates contract revenues in the third quarter to be at the lower end of its previous estimate of $380-$410 million.
Investors do seem concerned about the cancellations. Despite the company’s high occupancy rates, TipRanks’ Stock Investors tool indicates that investors currently have a Very Negative outlook on Marriot Vacations, with about 2.1% of investors who hold portfolios on TipRanks reducing their exposure in the last seven days.
Further, in response to the updated guidance news, Jefferies analyst David Katz maintained a Buy rating on Marriot but lowered the price target to $190.00 (implies 14.5% upside potential) from $200.00, to take “a marginally more measured stance on valuation.”
Katz now forecasts contract sales of $390 million in the third quarter, with an EBITDA margin of 23%, down from 25% before. Overall, he upped his sales forecast to $1.08 billion, up from $1.05 billion previously.
On TipRanks, Marriot Vacations stock has a Strong Buy consensus rating, based on 4 Buys.
As for price targets, the average Marriot price target of $194.75 implies 19.55% upside potential to current levels.
Disclosure: On the date of publication, Shalu Saraf had no position in any of the companies discussed in this article.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.