On Tuesday, Deutsche Bank has updated its stance on Park Hotels & Resorts Inc . (NYSE:PK), raising the price target to $24 from $23 while maintaining a Buy rating. The adjustment reflects a growing confidence in the company's potential to attract more interest from real estate investment trust (REIT)-dedicated funds.
The bank's analyst noted that Park Hotels & Resorts, also known as PK, has been appealing mainly to beta generalists and event-driven investors, particularly due to the company's strategic move away from its two major San Francisco properties. However, there is a broader market consensus building around PK's prospects, especially given its attractive dividend yield and the reduction in leverage.
The optimism is partly due to specific company strategies that are expected to improve Total Revenue Per Available Room (TRevPAR) and hotel EBITDA. The firm has set what is considered to be reasonable and achievable annual guidance, especially regarding Funds From Operations (FFO) per share.
Although there is ongoing discussion about the pace of recovery in Japanese tourist numbers to Hawaii, analysts believe that PK has a sufficiently strong business already established for 2024 in that market. This suggests that management's internal expectations for the Hawaiian market are likely factored into their plans.
In light of strong fourth-quarter 2023 and year-to-date performance from peers with higher trading multiples, Deutsche Bank anticipates that PK could narrow the valuation gap. The bank sees a potential for approximately 40% upside in the stock over a 12-month period, leading to the revised price target of $24. The Buy rating on PK remains unchanged.
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