Extended Stay Shares Remain Undervalued, Says Barclays

Following a series of investor meetings, Barclays expressed that they still believe shares of Extended Stay America Inc (NYSE: STAY) to be undervalued when factoring in operations and an opportunity for real estate monetization.

The firm maintains its Overweight stock rating and price target of $19.

Extended Stay management sees the company's real estate portfolio as its main source of upside potential in coming years, according to Barclays' U.S. lodging analyst Anthony F. Powell.

"While many investors are likely (and perhaps justifiably) in a 'wait and see' mode given overall industry uncertainty and previous instances of STAY missing ambitious targets," said Powell, "we believe current valuation presents a favorable risk/reward opportunity."

Related Link: Is Extended Stay's Debt Load Too Heavy Of A Burden?

According to Powell, the company has seen increased inbound interest regarding real estate transactions since it announced a plan to sell assets and "kick-start" growth.

"The transactions could include small outright sales of hotels for conversions, sales of 8–10 hotels to active franchisees, and (most interestingly) sales of larger chunks (80–150 hotels) to passive investors interested in yield," said Powell, adding that he expects to see several related announcements over the next several quarters.

At time of publication, Extended Stay America was up 1.48 percent on the day at $14.40.

Full ratings data available on Benzinga Pro.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!