The hotel and timeshare company Wyndham Worldwide stands to gain from an improving economy in the U.S, according to Goldman Sachs research published Friday, sending shares to an all-time high.
THE SPARK: Goldman Sachs analyst Steven Kent raised Wyndham Worldwide to "Buy" from "Neutral," and he raised his target price on the company's stock to $55 per share from $45.50 per share.
THE BIG PICTURE: Hotel operators like Wyndham Worldwide have been hurt by the global economic downturn, which has cut consumer spending at resorts and time-share vacation properties.
The company also runs more affordable hotel chains in the United States, like the Super 8, Ramada, and Days Inn chains. Those hotels were hurt but cutbacks in business travel and vacation spending as U.S. consumers and companies tightened their belts.Wyndham Worldwide has been forced to cut rates further to attract customers.
The stock has climbed steadily after trading just above $3 per share during the financial crisis of 2008.
Net income rose 10 percent last year, compared with 2010, and revenue rose 10.4 percent to $4.25 billion.
THE ANALYSIS: Worldwide's outlook is better than many analysts believe, Kent said, thanks in part to new revenue and also cost-cutting initiatives.
Many investors worried that Wyndham Worldwide might have to build new timeshare properties as it runs out of inventory. That could increase costs and hurt profits. But Kent said his latest analysis shows the company's inventory could last for another 10 years.
Kent also expects that the company will buy back more stock and boost its dividends.
Because the company's operations are 70 percent U.S.-based, Wyndham Worldwide is poised to benefit from an economy that is recovering faster than in other parts of the world, Kent believes.
THE STOCK: Wyndham Worldwide Corp. shares rose $1.71, or 3.8 percent, to $46.83 in late-day trading Friday. Shares traded as high as $46.99.