Compass Point upgraded Pebblebrook Hotel Trust (NYSE:PEB), hence increasing its rating to Buy from Neutral while keeping its $17 price target. Expectations of an adjusted EBITDA increase in 2025 indicate possible recovery for the hotel REIT industry, which led to the upgrade.
Thursday at $12.57, PEB moved 1.62% higher pre-market following the announcement. Compass Point noted that average adjusted EBITDA growth in 2024 is expected to be 0.7% declining for hotel REITs. Supported by possible macroeconomic stabilization and relaxing of monetary policy, the measure is expected to rebound with a 4.4% increase in 2025.
Hotel REITs YTD have suffered under "tepid 2024 earnings guidance and weak investor sentiment," Compass Point analysts said in a research note. "Although more rate cuts would help, the sector would gain more from more economic certainty and revived private equity interest in hotel properties." Leading leader in the luxury hotel market, Pebblebrook could be positioned to take advantage of better fundamentals as the larger hotel sector adapts to changing market conditions and post-pandemic dynamics.