Last week’s earnings release showed Non-GAAP EPS coming in 75% higher than analysts expected while revenue also topped the consensus.
The big headline grabber was net income, which grew 620% compared to the same quarter last year. With this kind of fundamental momentum, it’s easy to see why Wall Street hasn’t been slow about picking up shares in recent weeks. While the stock traded choppy for much of 2018 and 2019, a fire was lit towards the end of last October and shares had rallied 35% up to last Thursday’s close.
Monday’s drop, while hefty enough, is something that all hotel and travel names are experiencing and Hyatt looks to be well-positioned to bounce hard once fears abate.
Mark S. Hoplamazian, the company’s CEO, said, “We had a strong finish to the year, delivering nearly 12% growth in fee revenues and 7.4% net rooms growth, fueled by a record-setting 90 new hotels opened across our system in 2019. We ended the year with a material increase in the percentage of our earnings coming from our managed and franchise fee business. This was driven by consistent execution of our strategy to concurrently drive our organic growth and continue to reduce our holdings of hotel real estate at attractive valuations.”
No Industry is Safe
Management made sure that investors knew they were aware and conscious of the potential damage the coronavirus could wreak as worldwide travel drops. However, they stopped short of including it in their forward guidance as they were unable to quantify the risk into a hard number.
Across the hospitality sector, the coronavirus was taking its toll on individual stocks. Marriott (NASDAQ: MAR) and Hilton (NYSE: HLT) shares were both down around 5%. Cruise names have been hit even harder and the likes of Carnival (NYSE: CCL) saw its shares dip to 5-year lows and they’ve now lost 25% of their value in just 4 weeks. Royal Caribbean (NYSE: RCL) shares are down about the same since mid-January. Even tech names are being affected with Apple (NASDAQ: AAPL) stock taking as much as a 10% haircut as concerns grow regarding output and supply from their Chinese and southeast Asian factories.
For investors looking to get involved in Hyatt, concern about the spread of the coronavirus will be the big driver of the share price in the coming weeks. Until fears abate, you’re kind of taking a punt as Monday’s session shows how quick multi-billion stocks can drop with the wrong kind of news updates. That being said, there is a decent level of support around the $80 mark which could be a good entry point to aim for. The $65-70 mark below would be the second line of defense but it’s hard to see the stock going there without a major worldwide epidemic breaking out.
As we noted last week, hotel names tend to outperform when the economy is strong and as the economic slowdown that threatened in 2019 appears to have abated so far in 2020, the likes of Hyatt are robust enough to quickly recapture any lost territory if / when the coronavirus runs its course.