Hyatt Hotels Corp.’s stock tumbled 6.4% in morning trade Friday to the lowest level since November 2012, after Goldman Sachs downgraded the hotel chain to sell from neutral. Analyst Steven Kent slashed his stock price target to $33, which is 8.8% below current levels, from $47. Kent wrote in a note to clients that he has three primary reasons for the downgrade: 1) Hyatt has more operating leverage than its peers, “making it more vulnerable to an industry downturn;” 2) “Hyatt does not have the corporate finance levers that offset investor concern around weak hotel fundamentals;” and 3) “Hyatt is overexposed to urban markets where we are seeing the biggest surge in supply.” Regarding No. 2, Kent said while rivals Marriott and Starwood are dealing with industry weakness by merging, and Hilton may spin off its timeshare and owned hotels business, Hyatt doesn’t appear to have this option. Regarding the weak hotel industry, Kent wrote: “We are in the downward leg of the hotel cycle, which will be characterized by rising supply, weakening demand, downward estimate revisions and multiple contraction. Hyatt’s stock has plunged 28% over the past three months, while the S&P 500 has lost 7%.
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