Wednesday, FBR Capital Markets upgraded Gaylord Entertainment Co. (GET) shares to Market Perform from Underperform and increased its price target to $17 from $11. The brokerage lowered its 2009 EPS estimate to $0.11 from $0.19, while raising its 2010 per share estimate to profit $0.04 from loss $0.25.
Analyst Patrick Scholes attributed the upgrade based on attractive valuation, despite long-term supply concerns. Although the analyst's long-term concerns about above-industry supply growth in GET's top markets have not changed, following the nearly 40% drop in the share price over the past seven weeks, with the S&P 500 down about 2%, signs of life in group bookings and a very attractive valuation versus that of peers mean that he can no longer justify his Underperform rating on the stock.
However, the analyst still has long-term supply concerns with GET. Unlike most other lodging names, the analyst believes that over the next several years, GET will potentially face higher-than-industry supply competition.
As group demand begins to pick up in 2011-2012, the analyst believes three markets will potentially see strong supply growth: Nashville, Washington, D.C., and Dallas. The analyst believes that these supply headwinds could lead to relative underperformance of earnings growth in 2012-2014 and make GET less poised versus peers to participate in the anticipated recovery.
Currently, GET is up $1.12 or 6.99% and trading at $17.15.
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