Marriott Could Offer Profitable Short Sales
Marriott International Inc. (MAR) traded within a few cents of an all-time high on Thursday, defying continued headwinds from pandemic-driven limitations on business and international travel. The stock has gained about 19% in the last five weeks, carving a straight up advance that has cautious technicians scratching their heads. Accumulation has also ticked higher during this period but remains well below the new high posted in March.
Head-Scratching Price Action
The stock dropped like a rock in August after beating Q2 2021 earnings by a wide margin but missing revenue estimates, despite a 115.1% year-over-year increase. It fell 12% into mid-month and turned higher, entering the buying wave that may have ended last week. That impulse loosely corresponded with the summer’s Delta variant peak but it’s hard to justify the correlation, with airline carriers gaining little ground over the same period.
Head-scratching price action continued through September, with buying pressure picking up after a company presentation that emphasized continued negative impacts on revenue, with a 23% decline in July compared to 2019 levels. That number expanded to 27% in August and there’s little reason to believe it improved considerably in September, with many corporations deferring business travel until the start of 2022, at the earliest.
Wall Street and Technical Outlook
Wall Street consensus has a firmer grasp on reality, with an ‘Overweight’ rating based upon 7 ‘Buy’, 1 ‘Overweight’, 14 ‘Hold’, and 1 ‘Underweight’ recommendation. No analysts recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $130 to a Street-high $180 while the stock will open Monday’s session about $10 above the median $148 target. This placement suggests that Marriott is overvalued at this time.
Marriott topped out at 149.21 in January 2018 and failed a December 2019 breakout after adding just four points. It slid to a 6-year low during 2020’s pandemic decline and turned higher, returning to the prior peak in February 2021. The subsequent breakout added another four points before failing once again, carving a shallow three-year trendline that’s getting tested once again. Given weak technicals and continued headwinds, this looks like a short sale setup with moderate risk, and the potential for a trip toward 130.
For a look at today’s economic events, check out our economic calendar.
Disclosure: the author held no positions in aforementioned securities at the time of publication.