Rising recession fears due to the aggressive interest rate hikes have led to an intense market sell-off over the past couple of months. Many analysts expect the economy to witness a recession in the first half of 2023. This has shifted consumer spending from entertainment, leisure, and travel to basic necessities.
The travel industry has been badly affected by rising costs. Airlines have been unable to cope with the resurgence of demand due to staffing issues and high fuel costs. Flight cancellations have been rampant, leading to slow demand for luxury hotel chains.
The potential economic slump is expected to impact travel, leading to a downturn in hotel bookings. Investors’ declining interest in this sector is evident from the Kelly Hotel & Lodging Sector ETF’s 15% loss over the past three months.
Given the industry’s bleak prospects, we think it could be wise to avoid fundamentally weak hotel stocks Hall of Fame Resort & Entertainment Company (HOFV) and Hyatt Hotels Corporation (H), which are currently witnessing a downtrend.
Hall of Fame Resort & Entertainment Company (HOFV)
HOFV is a leading sport, entertainment, and media enterprise leveraging the popularity of professional football and players in partnership with the Pro Football Hall of Fame. It also offers live entertainment and events, including top performers, sporting events, and festival programming.
On July 6, 2022, HOFV announced that it secured a $33.4 million PACE loan from Stonehill Strategic Capital, LLC. This is expected to increase the company’s total debt and interest burden.
HOFV's loss from operations widened 25.3% year-over-year to $9.96 million in the first quarter ended March 31, 2022. Its adjusted EBITDA loss widened by 36% from its year-ago value to $6.90 million, while its net loss narrowed 93.6% year-over-year to $8.11 million. Also, its net loss per share amounted to $0.08, narrowing 95.2% from the same quarter last year.
HOFV's EPS is expected to remain negative in fiscal 2022 and 2023. Shares of HOFV have declined 67.5% over the past nine months and 76.6% over the past year. It closed the last trading session at $0.79.
HOFV's POWR Ratings reflect its poor prospects. The company has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an F grade for Growth and Quality and a D for Value and Stability. Within the Travel - Hotels/Resorts industry, it is ranked last out of 22 stocks. To see HOFV’s rating for Momentum and Sentiment, click here.
Hyatt Hotels Corporation (H)
H is a global hospitality company operating through five segments: Owned and Leased Hotels, Americas Management and Franchising, ASPAC Management and Franchising, EAME/SW Asia Management and Franchising, and Apple Leisure Group.
In the fiscal first quarter ended March 31, 2022, H’s direct and selling, general, and administrative expenses grew 112% from the prior-year quarter to $1.25 billion. The company’s net loss narrowed 76% year-over-year to $73 million, while its net loss per share came in at $0.67, representing a decrease of 77.6% year-over-year.
Analysts expect H’s EPS to remain negative for fiscal 2022. The stock has declined 17.3% over the past three months and 16.3% year-to-date to close its last trading session at $80.24.
H’s POWR Ratings are consistent with this bleak outlook. The stock has an overall D rating, which equates to Sell in our proprietary rating system. It also has a D grade for Stability, Sentiment, and Quality. Within the same industry, it is ranked #21.
In addition to the POWR Rating grades I’ve stated above, you can see H’s Growth, Value, and Momentum ratings here.
HOFV shares were trading at $0.79 per share on Friday afternoon, down $0.00 (+0.46%). Year-to-date, HOFV has declined -48.03%, versus a -16.12% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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