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Pebblebrook Reports Worse-Than-Expected 4Q Loss Amid Pandemic; Street Sees 10.8% Downside

Pebblebrook Hotel Trust’s fourth-quarter results were disappointing as its operations were disrupted due to travel restrictions amid the pandemic.

Pebblebrook (PEB), which owns urban and resort lifestyle hotels, reported a 4Q loss of $1.39 per share, wider than analysts’ expectations of a loss of $0.93 per share. The company reported earnings of $0.08 per share in the year-ago period.

The company’s 4Q revenues fell steeply by over 80% year-over-year to $74.2 million, missing the Street’s estimates of $80.2 million, due to a disruption in travel demand.

Nevertheless, the company has witnessed improving operating trends through October, “driven by healthy leisure travel demand and some slow recovery in business travel.” The company’s occupancy rate at open hotels declined from 37.9% in October to 29% in November and 19.8% in December. 

Looking ahead for 2021, the company’s CEO Jon E. Bortz expects “gradual recovery as leisure and business travel demand returns.” He added, “We are cautiously optimistic that we will return to profitability in the second half of this year, and we feel confident we are in a great position for significant growth and investment opportunities in the years ahead.” (See Pebblebrook stock analysis on TipRanks).

Following the earnings release, BMO Capital analyst Ari Klein maintained a Hold rating and a price target of $18 (20.7% downside potential) on the stock. In a note to investors, the analyst said, “While trends deteriorated through January, PEB has since seen a ‘material’ increase in demand and bookings, consistent with fewer COVID-19 cases/vaccine ramp.” He added that “Post 1Q, cash burn is expected to moderate and turn positive mid-year, reflecting expectations for continued improvement.”

Klein, however, believes that “the pace of recovery remains uncertain and the recent run (+21% YTD) balances the risk/reward.”

The Street has a cautious outlook on the stock with a Hold consensus rating, based on 4 Holds and 1 Buy. The average analyst price target of $20.25 implies downside potential of about 10.8% to current levels. Shares are down about 8.6% over the last year.

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