Balanced Financial Strategy Prompts Hold Rating for Host Hotels & Resorts

In a report released on May 7, Michael Bellisario from Robert W. Baird maintained a Hold rating on Host Hotels & Resorts (HST – Research Report), with a price target of $21.00.

Michael Bellisario has given his Hold rating due to a combination of factors surrounding Host Hotels & Resorts’ financial activities and market position. Host Hotels & Resorts’ recent issuance of $600 million in unsecured notes at a 5.921% yield to maturity showcases their ability to secure financing at a historically tight spread over Treasury yields, reflecting a cost of capital advantage compared to peers. Nevertheless, the all-in cost of capital has increased due to higher base rates, indicating a more expensive financing environment. This move was strategic for Host as it allowed for the repayment of outstanding debt and the financing of a significant acquisition, without necessitating immediate changes to our financial models.

Despite the positive aspects of Host’s financial maneuvering, the Hold rating suggests that there are no compelling drivers for an upgrade to a Buy rating at present or significant concerns that would justify a Sell rating. The company’s use of proceeds demonstrates prudent financial management by paying off higher-interest debt and funding new acquisitions with more favorable debt terms. However, since the acquisition of the 1 Hotel/Embassy Suites Nashville Downtown wasn’t previously factored into our models, its impact is neutrally balanced by the cost-effective debt strategy. This equilibrium of factors leads to a Hold recommendation, implying that the stock is adequately valued given the current information.

HST’s price has also changed moderately for the past six months – from $16.580 to $18.720, which is a 12.91% increase.

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Host Hotels & Resorts (HST) Company Description:

Host Hotels & Resorts, Inc. is a self-managed and self-administered real estate investment trust, which engages in the management of luxury and upper-upscale hotels. It operates through the Hotel Ownership segment. Its properties are located in U.S., Brazil, Canada, and Mexico. The company was founded in 1927 and is headquartered in Bethesda, MD.