Pebblebrook Hotel Trust (PEB, Financials) rose in pre-market trading Friday after Stifel upgraded its rating to Buy from Hold; DiamondRock Hospitality (DRH, Financials) fell following a downgrade to Hold from Buy by the same research firm.
Pebblebrook is trading historically at a discount to peers, Stifel pointed out. The research company also noticed in its study that CEO and Chairman Jon Bortz recently bought 33,000 shares at $12.39 per share.
"West Coast markets San Francisco, Los Angeles, and Portland have had a 600 basis points negative drag on the REIT's 2024 RevPAR," Stifel stated. However, the firm also noted optimism for 2025. "Recent market commentary from PEB as well as its peers indicates that these markets are beginning to show signs of improvements, setting up for a more positive 2025," analyst Simon Yarmak wrote in a research note.
"Group demand for 2025 is very strong, with group room nights currently ahead by 6.2% year-over-year, ADR up by 2.2% y/y, and total group revenue on the books up by 8.5% compared to the same time last year. PEB's peers are reporting mixed group pace results for 2025," the note added. From $14.75, Stifel raised Pebblebrook's target price to $15.00.
Conversely, Stifel downgraded DiamondRock Hospitality citing less than optimal performance criteria. On the third-quarter results call, the company said that the group pace for 2025 is 3.0% lower than the previous year. The company has also lowered its 2024 predictions for RevPAR and overall RevPAR to reflect ongoing trends and the impact of catastrophes.
Last week, DiamondRock paid $30 million for the 245-room AC Hotel in Minneapolis at an 8.2% cap rate. Stifel noted out the property never really escalated post-COVID. The business decreased its 2025 forecast from $1.04 to $1.01 while keeping its 2024 funds from operations prediction at $0.99. Stifel lowered the stock's target price from $10.75 to $10.25.
