While private equity activity in the lodging space has been one of the primary drivers of stock returns over the past year, they believe the takeover premium implied in MAR's valuation was de minimis. The firm never considered MAR to be near the top of the list in terms of takeover candidates as it does not own the underlying real estate at its hotels.
They continue to believe the fundamental operating environment is favorable for the major lodging companies. Supply growth in urban and resort locations, areas where these companies generate a significant portion of EBITDA, remains below historical levels and demand remains strong.
On MAR's 2Q07 earnings call, management indicated group bookings are solid, which should continue to drive pricing power in 2H07 and 2008. Fundamentally, the firm sees little risk to 2007 and 2008 "core" EPS estimates of $1.96 and $2.34, respectively.
Reiterates Buy and $59 target.
Notablecalls: Jeffco's comments make sense. MAR has gotten hit and I would watch the stock today for a bounce. Tough to say when it will happen, but keep an eye on MAR intraday.