Argus Downgrades Starwood Hotels To Sell, Says Investors Should Take Proceeds And Buy Priceline

Argus’ John Staszak downgraded the rating for Starwood Hotels & Resorts Worldwide Inc (NYSE: HOT) to Sell, with a price target of $71, after the company agreed to be acquired by Marriott International Inc (NASDAQ: MAR) for $72.08 per share. The analyst noted that Starwood’s shares were already trading at a price only marginally lower than the buyout price.

The acquisition price values Starwood Hotels at $12.2 billion. The shares trading close to the buyout price makes the downgrade appropriate, analyst John Staszak said, while recommending investors to sell their shares in the company and reinvest the proceeds in Priceline Group Inc (NASDAQ: PCLN). [Rated: BUY]. He warned that Starwood’s shares could plummet in case the acquisition is not completed.

Related Link: Can Marriott's Acquisition Of Starwood Help Battle Threats From Airbnb?

Starwood's Outlook Disappoints

Starwood reported its 4Q15 operating earnings at $0.89 per share, down from $0.97 in 4Q14. The company’s EPS was higher than the consensus expectation of $0.79 and management’s guidance of $0.76-$0.82.

Management announced its 2016 guidance below consensus expectations. The company reduced its RevPAR growth forecast from 4-6 percent to 2-4 percent, and projected its adjusted EPS at $2.74-$2.84, significantly short of the consensus of $3.27.

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