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Why Shares of DiamondRock Hospitality Company Are Rising Today | The Motley Fool

What happened

Shares of DiamondRock Hospitality (NYSE:DRH) traded more than 9% higher in the final hour of trading on Friday after analysts at Deutsche Bank raised their price target on the real estate investment trust (REIT).

So what

Deutsche Bank analyst Chris Woronka maintained a hold rating on the stock and raised his price target on the company from $10.22 per share to $11 per share, representing a 7.63% increase.

REITs tend to own different kinds of commercial real estate including, but not limited to, office buildings, shopping centers, hospitals, retail stores, and hotels.

Image source: Getty Images.

Due to the pandemic shutting down broad swathes of the economy, many REITs struggled in 2020. DiamondRock Hospitality was no exception; it owns 31 premium hotels and resorts in the hard-hit lodging sector.

In March of 2020, DiamondRock, seeing its shares tank all the way down into the $2 range, suspended its dividend. But the company has since rebounded nicely on vaccine news and the potential to return to a somewhat normal life and economy.

Now what

Recently, DiamondRock reported a $208 million loss for the fourth quarter of 2020, down from a nearly $135 million profit in 2019. For the full year, the company reported a $396 million loss after reporting a $184 million profit in 2019.

While the worst may be over, DiamondRock currently only trades about 6% down from where it started 2020, so some of the recovery may already be priced in.

Additionally, it could still take some time for people to feel safe going to hotels and resorts again. Current vaccines may also not be able to ward off mutations of the coronavirus right away, further delaying the recovery. Investors should proceed with caution before buying the stock, recently trading around $10.22 per share. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.


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