In this week’s piece we discuss five topics: 1) poor freight trends as it relates to our coverage; 2) softer U.S. GGR trends in June; 3) VAC’s valuation is near an all-time low versus its prior parent company MAR; 4) recently disclosed buybacks from CCL, and our analysis on why additional buybacks could be limited for at least a couple years; and 5) our thoughts on a possible sale/leaseback transaction at MGM for Bellagio and MGM Grand, and our analysis on what we think this could be worth to the stock. Please click the link above for the full report.
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For our Weekly Sho we've recorded a 20-minute video with 36 slides highlighting our current views as we head into another earnings season. The cruise line section begins at 4:03, the lodging section begins at 9:00, and the gaming section begins at 15:40. Enjoy the rest of your weekend!
Our coverage is up 24% YTD, on average, which is modestly outperforming the market. However, our coverage remains 21% below 2018 highs, on average, and also 10% below 2019 highs, on average, all while the market is near an all-time high. Our coverage mostly remains out-of-favor, in our opinion, but we see some opportunities. Within lodging our best idea is VAC. Within gaming our best idea is ERI. And within cruise our best ideas are RCL/NCLH.
In this week’s piece we discuss 1) the reaction after CCL’s results, the read-through to RCL and NCLH, and what we’ve heard from our conversations; 2) some additional thoughts on the ERI asset sales as it pertains to ERI/CZR; and 3) why we think HGV’s stock has materially outperformed in recent weeks. Please click the link above for the full report.
This was an eventful week for our coverage and for us as we were out meeting with investors most of the week. For this week’s piece we discuss 1) the Cuba travel ban, 2) more news flow on a potential CZR acquisition, 3) our VAC thesis with an interesting chart following our roadshow with management, and 4) our gauge of investor sentiment from our conversations. We’re also rebranding this weekly piece from our “Charts of the Week” to now “The Weekly Sho.”
WH trades at a discount to peers and we often hear some investors tell us the discount should close over time. Admittedly, the level of WH’s relative valuation seems more compelling to us – specifically versus CHH – as WH has underperformed CHH and its relative valuation to CHH has contracted further since WH’s spinoff last year. However, we continue to rate the stock Peer Perform because we believe there are reasons for a discount to peers – especially relative to MAR and HLT – and there are reasons why we don’t believe the valuation gap will meaningfully close in the near term. In this week’s piece we explore this idea by analyzing ten themes that factor into WH’s relative valuation. Please click the link above for the full report.
Each year around this time we dig through annual proxy statements to learn about changes in corporate governance and shareholder alignment, and we publish the results. Specifically, we study three broad categories: 1) CEO compensation, including how much and how it’s derived, 2) CEO equity ownership, and 3) board composition. We gave each company a qualitative score for each category and aggregated the results in Exhibit 1. Every company has areas of improvement, in our view, but HLT and WYND scored best based on our qualitative aggregation, followed by VAC, NCLH, and WH. All five are companies we think to be commercially aggressive and shareholder focused
In this week’s piece we discuss five ideas with five charts, including probably way-too-early hurricane forecasts for the upcoming Atlantic hurricane season as it relates to cruise lines; NCLH’s recent consistent beat and raise execution, and what that hasn’t meant for the equity multiple; why VAC’s planned analyst day later this Fall seems positive; RevPAR index gains for brands, who seemingly took RevPAR share from independents in 1Q, which we believe is positive for the long-term model; and softer Chinese credit data in April, and what that might mean for Macau GGR. Please click the link above for the full report.
Last week was a busy week filled with cruise, gaming, and lodging earnings reports. In this week’s piece we highlight ten key themes with several charts. Please click the link above for the full report.
This is a deep dive report we write each quarter where we update our thesis with new charts and preview each company and update estimates into earnings. Since the Christmas Eve bottom the average of our coverage is up 32%. The absolute risk/reward now seems less compelling, but the S&P 500 is also up 22% since the bottom, and our coverage is higher beta and already meaningfully underperformed the market last year.
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