CHH Stock Forecast & Price Target

Choice Hotels International, as of December 31, 2023, operates 633,000 rooms across 15 brands, with a focus on the economy and midscale segments, allowing the company to effectively position itself within a competitive market. The acquisition of Radisson in August 2022 significantly expanded its scale, adding approximately 70,000 rooms, and the continued focus on profitable growth has resulted in an impressive 9% compound annual growth rate (CAGR) in adjusted earnings per share since 2018. Furthermore, the global development pipeline shows a robust sequential growth with an increase of 52 hotels in 2023, which enhances the company's future cash flow potential and reinforces its attractiveness to developers and franchisees.

Choice Hotels International's stock outlook appears negative due to a decline in its pipeline by approximately 5% in 2023, indicating potential challenges in future growth and expansion. The company is currently trading at a discounted valuation of about 18x EPS and 12.75x EV/EBITDA, below historical averages and relative to peers, likely influenced by concerns stemming from the ongoing hostile takeover attempt of Wyndham. Additionally, increased competition in the economy and midscale segments, coupled with a slower earnings growth profile and the risk of its brands losing favor with consumers and developers, raises further concerns about the company's performance and market share.