La Quinta's Oil Exposure May Be Its Undoing

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Stifel recently issued a report on La Quinta Holdings Inc LQ after analysis showed that the hotel chain has sizable exposure to hard hit oil regions. The firm downgraded La Quinta from Buy to Hold with a $17 price target.

Analysts Simon Yarmak and Joseph van Bemmelen wrote, "The company has the largest exposure to TX. The oil regions continued to impact performance during the quarter... The company also introduced adjusted 2016 EBITDA guidance of $367-$384 million. Our prior EBITDA estimate was $412.0 million and the Street $406.0 million."

Analysts at Stifel gave two key takeaways for La Quinta.

1. Portfolio Growth

While analysts at Stifel noted that La Quinta has a large exposure to hard hit oil regions, portfolio growth is increasing with the hotel operator opening 19 new hotels in 4Q15. Furthermore, during 2015 the company signed 107 new agreements with franchisees, the highest annual amount since 2008.

2. Investments And Share Repurchases

Analysts at Stifel wrote that La Quinta's management will enact a renovation program in an attempt to modernize its hotels and improve customer satisfaction. Furthermore, the company also announced and implemented a plan to repurchase $100 million worth of shares in an attempt to stabilize its stock price. Stifel believes that the board could approve another $100 million repurchase for 2016, bringing additional value to shareholders.

Shares of La Quinta recently traded at $10.08, down 11.27 percent.

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Posted In: Analyst ColorDowngradesPrice TargetAnalyst RatingsJoseph van BemmelenSimon YarmakStifel Nicolaus
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