Real estate investment trust (REIT) Ashford Hospitality Trust, Inc. (AHT) is focused on investing in upscale full-service hotels. Its hotel properties operate primarily under established brands such as Hilton, Hyatt, Marriott and Intercontinental Hotel Group. The stock has lost 10.4% over the past nine months to close yesterday’s trading session at $3.36. It is currently trading 82.1% below its 52-week high of $18.80.
On December 11, 2020, the company announced that it is continuing the suspension of its common stock and preferred dividends into fiscal 2021, due to disruptions in the business caused by the COVID-19 pandemic. It also reported weak financials in its last-reported quarter.
So, here’s what we think could shape AHT’s performance in the near term:
Unimpressive Historical Performance
AHT’s revenue decreased at a 29.2% CAGR over the past three years and 17.5% over the past five years. So, it’s evident that the company has been struggling to generate significant revenues even in the pre-pandemic environment. In fact, the stock has lost 94.1% over the past five years and 95.2% over the past three years.
Conflict with Cygnus Capital
AHT filed a lawsuit against Cygnus Capital, Inc. on January 19 to prevent Cygnus from waging what the company believed is an illegal proxy contest to seize control of its board of directors. However, Cygnus CEO and Founder Christopher Swann said, “The lawsuit filed last week by AHT is baseless and we intend on vigorously defending ourselves. This action appears to be a blatant entrenchment maneuver intended to disenfranchise Cygnus.” On February 23, AHT announced that Cygnus has decided to withdraw its purported nominations of all its director candidates for election at AHT’s 2021 annual meeting of stockholders. However, the company’s action against Cygnus and the other defendants ( Ashford Hospitality Trust, Inc. v. Cygnus Capital, Inc., et al., No. 3:21-cv-00125-M), is still pending in the United States District Court for the Northern District of Texas, Dallas Division.
Weak Recent Financials
For its fiscal year 2020 fourth quarter, ended December 31, 2020 AHT’s top line decreased 74.6% year-over-year to $90.25 million. Its comparable RevPAR for all hotels declined 70.1% year-over-year to $35.70 during the quarter. Its operating loss for the quarter came in at $99.67 million, compared to operating income of $12.53 million in the prior-year period. The company’s net loss also came in at $137.59 million, compared to $35.62 million in fiscal 2019 fourth quarter. Its loss per share was $2.29, compared to $3.90 in the prior-year period.
POWR Ratings Reflect Bleak Prospects
AHT has an overall D rating, which equates to Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. AHT has a D grade for Quality, in sync with its negative trailing-12-month net income margin compared to the 8.6% industry average.
The stock also has a D grade for Value. This is consistent with its 107.4% trailing-12-month Total Debt/Capital ratio, which is significantly higher than the 50.6% industry average Also, it has a F grade for Stability.
AHT is ranked #15 of 22 stocks in the F-rated REITs – Hotel industry. To access AHT’s ratings for Growth, Momentum, and Sentiment, click here.
Bottom Line
Thanks to extensive vaccinations, hotels are expected to reopen gradually. But it’s expected to take a long time before their business returns to pre-pandemic levels. Amid this backdrop, it’s wise to avoid AHT because analysts expect its revenue to decline 57.1% for the quarter ended March 31. Furthermore, , the company’s EPS is expected to remain negative in fiscal 2021 and fiscal 2022. So, it's wise to avoid the stock now..
AHT shares were trading at $2.93 per share on Tuesday morning, down $0.43 (-12.80%). Year-to-date, AHT has gained 13.13%, versus a 10.94% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.
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