Cantor Fitzgerald: 4 Buy Rated Hotel REITs To Consider

On July 1, Cantor Fitzgerald analyst Gaurav Mehta published a research note updating earnings estimates, and raising the target price on three of its Buy rated lodging REITs. The based upon the new Cantor Fitzgerald price targets, these four hotel stocks offer investors potential total return opportunities from approximately 16 percent to 47 percent during the next 12 months.

Ashford Hospitality Trust AHT $878 million cap, 5.5 percent yield.
Chatham Lodging Trust CLDT $1 billion cap, 4.4 percent yield.
Host Hotels & Resorts HST $15.5 billion cap, 3.9 percent yield.
Summit Hotel Properties INN $1.2 billion cap, 3.5 percent yield.

Tale Of The Tape - Past Year

Ashford Hospitality Trust - Evolving Business Model

Ashford has developed into a special situation since it has announced an intent to sell significant select-service assets in order to change its focus to solely, upper-luxury full-service lodging properties. Management has previously stated its intent to apply proceeds from the sale, along with additional granular select-service dispositions, to fund AHT's ~$1 billion announced pipeline of luxury full-service acquisitions. Ashford management also negated the possibility of a spin-out of these select-service hotel properties, into another separately managed REIT vehicle.

Cantor Fitzgerald - Ashford (AHT): Buy Rating, $12 PT, Unchanged

The AHT target price of $12 represents a potential ~41.8 percent upside based upon the recent close of $8.46 per share.
The Cantor Fitzgerald $12 PT remains unchanged and "…is based on [its] 2016 adjusted EBITDA estimate of $435.5 million and a target multiple of 11.5x."
Notably, Cantor Fitzgerald has not attempted to model the AHT management's June 26, announcement to sell 23 select-service hotels, with an aggregate 4,308 rooms, which generated ~$44 million in NOI during the past 12 months.

Cantor Fitzgerald - Chatham (CLDT): Buy Rating, $33 PT, Increased $0.50

The new CLDT target price of $33 represents a potential ~24.6 percent price upside, based upon the recent close of $26.47 per share.
The Cantor Fitzgerald $33 PT "…is based on [its] 2016 adjusted EBITDA estimate of $146.5 million and a target multiple of 12.75x."
Cantor Fitzgerald raised its 2015E FFO a penny to $2.44 per share; and raised its 2015E adjusted EBITDA from $129.7 million to $130.5 million.

Cantor Fitzgerald - Host Hotels (HST): Buy Rating, $22.50 PT, Increased $0.50

The new HST target price of $22.50 represents a potential ~13.5 percent price upside, based upon the recent close of $19.83 per share.
The new Cantor Fitzgerald $22.50 PT "…is based on [its] 2016 adjusted EBITDA estimate of $1.57 billion and target multiple of 13.5x."
Notably, the Cantor Fitzgerald estimate includes a repurchase of 5.55 million shares for $117 million, and recent acquisition/disposition activity, including the recent Phoenician acquisition, (643 rooms) for $400 million.

Cantor Fitzgerald - Summit (INN): Buy Rating, $15 PT, Increased $0.50

The new INN target price of $15 represents a potential ~15.3 percent price upside, based upon the recent close of $13.01 per share.
The new Cantor Fitzgerald $15 PT "…is based on [its] 2016 adjusted EBITDA estimate of $160.2 million and target multiple of 12.75x."
Notably, the Cantor Fitzgerald estimate includes the pending sale of 26 hotels for $351.4 million, expected to close in Q4 2015 and Q1 2016; and Cantor Fitzgerald expects Summit to recycle this capital into new acquisitions, including ~$100 million announced through June.

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