Thursday, FBR Capital Markets upgraded Choice Hotels International Inc. (CHH) shares to Outperform from Market Perform and increased its price target to $32 from $29. The brokerage upgraded lodging sector to Overweight from Market Weight.
Analyst Patrick Scholes said that after significantly underperforming the group so far this year, his upgrade is primarily based on attractive relative valuation in light of recent signs of life in the transient/leisure customer.
Additionally, the analyst believes CHH has a greater likelihood than peers of earnings growth in 2010 and less risk of consensus estimate cuts. The analyst also believes that the company has seen an uptick in conversion activity during the past two months and that this should provide above-industry unit growth over at least the next 18 months.
Currently, CHH is up $1.84 or 7.54% and trading at $26.25.
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