After consolidating a huge move in 2009 the past 6 weeks, hotel operator Wyndham Worldwide (WYN) had some worrisome action yesterday, falling to the very low of its recent range before a late day rally saved it. Then this morning an upgrade has created a gap up, and pushed the stock out of this sideways range. Technically this is a "breakout"; however I'd rather see it happen naturally than on an analyst upgrade. For now, I will just sit on my hands with our current stake and see how the stock reacts go forward.
While not as cheap as it was throughout 2009, Wyndham is still roughly only at 12-13x full year 2009 earnings - a steep discount to peers who have been run up on the "US consumers is back" thesis. Thankfully the company continues to move away from its timeshare business which appears to be the main reason for such a hefty discount in valuation to its competitors.
- Wyndham Worldwide's attractive stock price and free cash flow strategy led a Deutsche Bank North America analyst to boost his rating and price target on the hotel operator Wednesday.
- Wyndham is cutting back on timeshare investments and running its business for cash, wrote Chris Woronka, who raised Wyndham to "Buy" from "Hold." Woronka also increased his price target to $28, from $17 because Wyndham's efforts could lead to improved free cash flow next year. That money could be used to buy back stock, boost dividends and make some acquisitions, Woronka wrote.
- In a separate note, Woronka said lodging companies like Marriott International Inc., Starwood Hotels & Resorts Worldwide Inc. and Host Hotels & Resorts Inc. may still benefit from low expectations and strong trading liquidity during the early first half of the year, but their stock prices appear fairly valued right now.
[Sep 29, 2009: Wyndham Worldwide and Sector Upgraded by Goldman Sachs]
[Jul 29, 2009: Wyndham Worldwide Solid: RevPAR Far Above Industry]
[May 1, 2009: Bookkeeping - Creating New Position in Wyndham Worldwide]
[May 1, 2009: A Stroll Through the Hotel Space]
Long Wyndham Worldwide in fund; no personal position