Economic headwinds likely to weigh on Marriott

Posted Apr 22nd 2009 11:00AM by Joseph Lazzaro
Filed under: Marriott Intl'A' (MAR), Stocks to Sell

Upscale hotel chain Marriott International (NYSE: MAR) is likely to experience difficult leisure conditions for at least the next year. Further, when the economy rebounds, consumers will be looking to add back basics, rebuild nest eggs, and perhaps replace an aging car: few will be thinking about a vacation in a far away destination.

Likewise, business travelers will continue to be asked to belt-tighten: conference call when possible, meet without a night's stay when possible, and perhaps stay at lower-cost hotel when traveling great distances.

All of the above is bad news for Marriott, with F2009/F2010 revenue likely to struggle to register small increases, hence the Sell rating. The First Call F2009/F2010 EPS estimates for MAR are 88 cents/94 cents.

Stock Analysis: Marriott is a moderate-risk stock. Consider selling a 25% position in MAR now; then sell another 25% in three months, if U.S. and global economic conditions don't improve substantially. Under any circumstance, don't Short more than 50% of your MAR position in the first half of 2009. Buy/Stop Loss if you were to sell shares in this company: $25. Cover your short on a bounce off $12 or $10.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: hotels, inthenews, travel