Wyndham stock gains on Wells Fargo upgrade

Investing.com -- Shares of Wyndham climbed 2.5% after Wells Fargo (NYSE:WFC ) Securities upgraded the hotel operator to overweight from equal-weight, citing a combination of reasonable valuation, low expectations, and improving fundamentals.

The positive market response follows Wells Fargo's assessment that revenue per available room (RevPAR) at the economy and mid-scale level, which comprises about 70% of Wyndham's footprint, has shown signs of inflection. The firm observed that U.S. economy RevPAR has increased year-over-year (YoY) for each of the past 12 weeks, while U.S. mid-scale RevPAR has risen YoY in 11 of those weeks. This trend marks a turnaround from a challenging period where economy RevPAR declined YoY in 17 out of 21 months from January 2023 to September 2024, and mid-scale RevPAR fell in 14 out of those months.

The analysis by Wells Fargo also highlighted historical patterns indicating that when RevPAR begins to positively inflect, asset-light C-corp stocks like Wyndham tend to outperform. Historical data spanning roughly 25 years shows that when the rate of change in RevPAR growth improves, such stocks on average increased by 21%, compared to a 13% rise during years when the rate of change declined.

Wells Fargo expressed confidence that Wyndham's 2026 Street estimates might be too conservative. The firm suggests that Wyndham could potentially reach $830 million in FY26 EBITDA, which is the midpoint of the company's guidance range. This projection, coupled with an improved RevPAR outlook, led Wells Fargo to increase their price target for Wyndham to $114, up from the previous target.

The analyst quote provided by Wells Fargo reinforced their positive outlook: "WH sticks out for its combination of reasonable valuation, low expectations, and improving fundamentals."

The upgrade and the ensuing stock movement reflect Wells Fargo's belief in Wyndham's growth prospects, supported by improving industry metrics and a favorable economic environment that could lead to better-than-expected financial performance.

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Source: Investing.com