2015-03-27 Options Activity Hints At New Highs In Marriott Coming Soon (MAR)
Options Activity Hints At New Highs In Marriott Coming Soon (MAR)
Notes: If you look at just the rally Marriott International has had since mid-2013 (more than doubled) and the current valuation it would appear the stock is overvalued. However, this isn’t the case when you account for the mid to high teens EPS growth and high single digit sales growth. The stock trades at a PEG ratio of 1.49x (above 2x is considered expensive) and P/S ratio of 8.05x. Strength in the business is largely coming improving consumer sentiment (partially due to lower fuel costs) and economy in the U.S. (RevPAR +6.7% in Q4), but there is also positive signs coming from Asia and Europe (RevPAR +3%). The company doesn’t see this being a fade for the Asia-Pacific region either since they have said they expect to double their exposure to the area by 2017. One potential reason behind Thursday’s unusual options activity (see yesterday’s Options Report for more details) in the lodging sector could foreshadowing more asset sales from the likes of Hilton or Marriott. Back in October, Hilton sold the iconic Waldorf Astoria New York to a Chinese insurance group for $1.95B (Hilton will still run the hotel). Seeing the top dollar they can get for their real estate could lead others to cash in on properties. To top it off in February Marriott’s board of directors approved a 25M share repurchase plan, bringing the total to 34M available to buyback. On February 23rd, Argus raised their price target to $96 from $86 (highest on the street).
Marriott International (MAR) Options Trade Ideas
Buy the (MAR) Apr $80 call for $2.50 or better
Stop loss- $0.95
1st upside target- $5.00
2nd upside target- $6.00
Buy the (MAR) Apr $80/$85 bull call spread for a $1.90 debit or better
(Buy the Apr $80 call and sell the Apr $85 call, all in one trade)
Stop loss- $0.85
1st upside target- $3.80
2nd upside target- $4.90
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