Marriott Likely To Trade Lower In The Second Half

Marriott International Inc. (MAR) has been hit hard by the coronavirus pandemic, with business travel worldwide grinding to a virtual halt.  Q1 2020 results released in early May reaffirmed those headwinds, missing profit estimates by a wide margin while revenue dropped 6.6% year-over-year to $4.68 billion. The company also filed a $0.42 per-share ‘impairment charge’, driven by heavy borrowing, bad debt expense, and guarantee reserves.

The lodging giant is highly-levered to the travel industry, which probably won’t recover to pre-pandemic levels for at least one to two years. The European Commission highlighted this sobering reality last week, suggesting it won’t permit American travelers due to a massive spike in infections. In addition, corporations worldwide are growing comfortable with virtual meeting spaces and may find it hard to resume the cost burden of sending employees on the road.

Marriott Bull Expects Rapid Recovery

Not everyone is bearish on Marriott at this time. For example, Barclay’s analyst Anthony Powell upgraded the stock from ‘Equal Weight’ to ‘Overweight’ last week, stating “in the near term, these companies should benefit from improving demand trends for U.S. select-service hotels and resort destinations; next year, the companies should more fully price in a return of corporate and group travel.” Even so, he admits that COVID-19 remains an unknown and ‘major hurdle’.

Wall Street And Technical Outlook

Broad analyst consensus is more cautious than Barclays, with just 3 ‘Buy’ recommendations, 12 ‘Hold’ recommendations, and 1’Sell’ recommendation.  Price targets currently range from a low of $74 to a street high $148, while the stock is now trading nearly $13 below the median $93 target. This weak placement indicates that investors remain skeptical about the long-term outlook, keeping their powder dry until macro conditions sound the ‘all-clear’ signal.

Marriott incurred heavy technical damage in the first quarter swoon and has failed to remount broken support levels during the three-month recovery wave. Committed sellers are getting more aggressive due to spiking COVID-19 cases in more than half of the American states, shining a highly bearish light on the travel industry.  The stock is unlikely to overcome these adverse conditions in the second half of 2020, raising fears it will eventually re-test the deep March low.