Analysts have reduced their average price target for Choice Hotels International from approximately $115.50 to $109.27. They cite ongoing concerns over soft room growth and pressured free cash flow conversion, despite resilient profit margins and earnings multiples.
Analyst Commentary
Street research on Choice Hotels International reveals a mix of cautious and optimistic perspectives regarding the company's near-term growth prospects and valuation.
Bullish Takeaways
- Bullish analysts maintain positive long-term views. They highlight resilient profit margins and earnings multiples that continue to support the stock's valuation.
- Recent price targets, while lowered, remain significantly above current trading levels. This signals confidence in the company's ability to navigate industry headwinds.
- The company's franchise model and established brand presence are seen as strengths that may position it for recovery once industry fundamentals stabilize.
Bearish Takeaways
- Bearish analysts note that free cash flow conversion remains under pressure, which limits near-term upside for shareholders.
- Softer domestic room growth raises concerns about Choice Hotels' ability to accelerate fee-based revenues and achieve meaningful expansion.
- Some view recent earnings outperformance as lower quality and driven by non-operational factors rather than core business momentum.
- There is a preference to wait for clearer inflection in fee growth before recommending the stock more broadly.
What's in the News
- Choice Hotels International announced its entry into the African market with three directly franchised properties in Kenya expected to open in early 2026. The company also has plans for at least 15 more hotels across sub-Saharan and southern Africa by 2030 (Key Developments).
- The company revised its 2025 earnings guidance upward, projecting net income of $353 million to $371 million. This update is based on a $100 million gain related to its expanded ownership in Choice Hotels Canada (Key Developments).
- MainStay Suites, an extended stay brand, has launched its first properties outside North America with the opening of seven hotels in Australia. This move strengthens Choice Hotels International's reach in the Asia-Pacific region (Key Developments).
- Significant growth took place in France, with the addition of 50 new Quality Suites properties nearly doubling the Choice Hotels portfolio and expanding it to 107 franchised hotels across the country (Key Developments).
- Radisson Blu Bariloche, the company's first property in Argentina, has opened. This marks a major step in the expansion of the Radisson Blu brand in the upper upscale segment in Latin America (Key Developments).
Valuation Changes
- Consensus Analyst Price Target has decreased from $115.50 to $109.27, reflecting a modest downward revision.
- Discount Rate has risen slightly, moving from 9.43% to 9.51%.
- Revenue Growth projection has edged down marginally from 30.41% to 30.34%.
- Net Profit Margin has increased fractionally, from 21.04% to 21.07%.
- Future P/E ratio has declined from 17.41x to 16.51x.
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