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Is Smart Money Following Marriott International (MAR)?

Despite robust strategic portfolio expansions, leading hotel company Marriott International (MAR) stock is currently on a downtrend. Let us analyze whether smart money is following the company. Read more...

Renowned hotel chain company Marriott International, Inc. (MAR) has institutional ownership of approximately 60.4%, with 1,292 institutional holders collectively holding 179,999,136 shares of the company. Robust smart money interest in a stock signifies that prominent and well-established institutional investors have confidence in the stock's potential.

While MAR boasts robust smart money, I think it might be wise to wait for a better entry point in the stock for the reasons discussed throughout the entire article.

The global hotel and other travel accommodation market grew from $747.32 billion in 2022 to $846.64 billion in 2023 at a CAGR of 13.3%.

The growing use of social media and mass media is significantly benefiting the tourism and hotel industries. Tourists sharing their travel experiences on social platforms are raising awareness about various destinations and recreational offerings worldwide.

Moreover, the hotel industry is adopting transformative technologies to enhance customer experiences and achieve cost savings. As a result, the hotel and other travel accommodation market is expected to grow to $1.05 trillion in 2027 at a CAGR of 5.5%.

Looking ahead, MAR anticipates stable global economic conditions throughout the year, with continued resilience in travel demand. However, there is an expectation of slightly higher RevPAR growth internationally compared to the U.S. & Canada, where RevPAR growth is settling into more typical seasonal patterns.

Shares of MAR have gained 31.1% year-to-date but fell 2.3% over the past month to close its last trading session at $195.17. In addition, shares of MAR are trading under the 50-day moving average of $200.80, indicating a downtrend. Also, it has a 60-month beta of 1.59.

Here are some factors that could influence MAR’s performance in the upcoming months:

Partnership with MGM Resorts

In July 2023, MAR announced that it had entered a 20-year licensing agreement with MGM Resorts International (MGM), allowing loyalty members to earn and redeem points for stays at MGM properties. They launched the "MGM Collection with Mariott Bonvoy," enabling members to use points at 17 MGM resorts across the United States and Canada.

This partnership aims to replicate the success of their 2021 franchise agreement for the Cosmopolitan Hotel in Las Vegas. Mar's net unit growth is expected to increase by 2.4% from this deal, exceeding 5% for the first time since 2015. MAR will earn fees on total room revenue from MGM Resorts, contributing to anticipated long-term sustainable growth.

Other Positive Developments

On August 24, MAR entered into a partnership with HDFC Bank in India to introduce the country’s inaugural co-branded hotel credit card. The credit card aims to leverage the aspirations of the emerging middle class within the nation.

Moreover, on August 14, MAR’s Delta Hotels announced the expansion of its global presence with its first hotel in New York City, the Delta Hotels by Marriott New York Times Square. This new addition to the Marriott Bonvoy portfolio offers stunning views of the city lights and embodies the brand's 'Simple Made Perfect' philosophy.

Located in the heart of Manhattan at 340 West 40th Street in Times Square, the hotel prioritizes essential details to provide a seamless and comfortable stay, with 310 guest rooms designed with craftsmanship and a modern aesthetic.

Robust Performance

In terms of performance, the second quarter saw global RevPAR increase by 13.5% (12.7% in actual dollars) compared to the same quarter in 2022. RevPAR grew by 6.0% (5.7% in actual dollars) in the U.S. and Canada, while international markets experienced a 39.1% increase (36.0% in actual dollars).

Mixed Financials

In the fiscal second quarter that ended June 30, 2023, MAR’s total revenues increased 13.8% year-over-year to $6.10 billion. The company’s adjusted operating income increased 22% year-over-year to $1.04 billion. Its adjusted net income rose 16% over the prior-year quarter to $690 million. In addition, its adjusted EPS came in at $2.26, representing a 26% increase over the prior-year quarter.

However, in the same quarter, MAR’s total expenses rose 13.5% from the year-ago quarter to $4.98 billion.

Elevated Valuation

MAR’s forward non-GAAP P/E of 22.66x is 61.4% higher than the 14.04 industry average. Its forward EV/Sales and P/S multiples of 2.93 and 2.44 are 159.8% and 191.8% higher than the industry averages of 1.13 and 0.84.

In addition, MAR’s forward EV/EBIT and EV/EBITDA multiples of 15.09 and 17.60 are 63.5% and 35.1% higher than the 9.23 and 13.03 industry averages.

Mixed Profitability

MAR’s trailing-12-month EBIT and EBITDA margins of 67.7% and 72.35% are 812.1% and 557.2% higher than the 7.42% and 11.01 industry averages.

However, MAR’s trailing-12-month asset turnover ratio of 0.24x is 76.1% lower than the industry average of 1x. Its trailing-12-month cash per share of $1.88 is 21.8% lower than the $2.40 industry average.

POWR Ratings Show Mixed Prospects

MAR has an overall C rating, equating to a Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. MAR has a C grade for Stability, consistent with its 24-month beta of 1.03.

Also, its C grade in Quality aligns with its mixed profit margins.

Among the 21 stocks in the A-rated Travel – Hotels/Resorts industry, MAR is ranked #15. Click here to access MAR’s ratings for Growth, Value, Momentum, Sentiment, and Quality.

Bottom Line

MAR has an institutional investment of more than 60%, which indicates the smart money’s solid interest in the stock.

Moreover, as a result of its robust portfolio and strategic partnerships, the company raised its full-year rooms growth and earnings guidance, expecting to return $4.10 billion to $4.50 billion to shareholders in 2023.

However, considering the company’s stretchy valuation, mixed profitability, and high beta, I think investors could wait for a better entry point in the stock.

How Does Marriott International, Inc. (MAR) Stack Up Against Its Peers?

MAR has an overall POWR Rating of C, equating to a Neutral rating. Other Travel – Hotels/Resorts stocks with a B (Buy) rating include Genting Berhad (GEBHY), Bluegreen Vacations Holding Corporation (BVH), and Genting Singapore Limited (GIGNY). For more Buy-rated Travel-Hotels/Resorts set to outperform, click here.

What To Do Next?

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MAR shares were trading at $196.14 per share on Friday morning, up $0.97 (+0.50%). Year-to-date, MAR has gained 32.79%, versus a 14.69% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.


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