Hilton Worldwide Holdings Inc. (HLT) stock is trading lower by less than 2% in Thursday's pre-market session after the hotel giant reported a larger-than-expected second quarter 2020 loss of $0.61 per share on $564 million in revenue. Revenue fell a staggering 77.3% year over year, missing estimates by more than 30%. Systemwide revenue per available room (RevPAR) posted even worse results, dropping 81.0%.

Key Takeaways

  • COVID-19 is keeping many travelers at home and away from hotels.
  • Hilton revenue shank nearly 80% in the second quarter of 2020 compared to the same period of 2019.
  • Hilton stock is trading in a weak position that favors even lower prices.

Analysts missed the mark by a country mile, counting on a second quarter recovery wave generated by reopenings around the world as well as new sanitary procedures intended to rebuild confidence in the hotel industry. Instead, travelers chose to stay at home and avoid public places, especially after a summer COVID-19 surge struck more than half of the American states. International travel bans completed the rout, with most parts of Asia and Europe now off-limits to U.S. air carriers.

A flurry of upgrades ahead of the release made a bad situation even worse, with Hilton rated a "Hold" based upon three "Buy" and seven "Hold" recommendations. Just one analyst recommended that shareholders close positions and move to the sidelines ahead of the news. Price targets currently range from a low of $63 to a Street-high $121, while the stock is set to open Thursday's session near the median $80 target. Given this placement, Hilton is likely to trade at lower levels in coming weeks.

A rating is an assessment tool assigned by an analyst or rating agency to a stock or bond. The rating assigned indicates the stock or bond's level of investment opportunity.

Hilton Worldwide Long-Term Chart (2013 – 2020)

Long-term chart showing the share price performance of Hilton Worldwide Holdings Inc. (HLT)

Hilton came public in its current incarnation in December 2013, opening at $43.70 and entering a choppy sideways pattern that finally broke out to new highs at the end of 2014. The uptick topped out in the mid-$60s in the second quarter of 2015, giving way to an aggressive decline that cut through the IPO opening print at the start of 2016. It posted an all-time low at $33.16 a few weeks later and ticked higher into an October 2017 breakout.

Bullish action carved new highs in January 2018, July 2019, and February 2020, when the uptrend posted an all-time high above $115. The subsequent decline failed the breakout above all three peaks, dropping to a three-year low that settled just 70 cents above the 2013 IPO opening print. The bounce into the second quarter reversed after stretching above the narrowly aligned 2018 high and 50-week exponential moving average (EMA), reinforcing resistance at $88 while dropping back to the 200-week EMA in the upper $70s.

An initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance. Public share issuance allows a company to raise capital from public investors. The transition from a private to a public company can be an important time for private investors to fully realize gains from their investment as it typically includes share premiums for current private investors.

Hilton Worldwide Short-Term Chart (2017 – 2020)

Short-term chart showing the share price performance of Hilton Worldwide Holdings Inc. (HLT)

The on-balance volume (OBV) accumulation-distribution indicator hit an all-time high in May 2018, four months after the price peak, and settled into a holding pattern that favored neither bulls nor bears. It failed to break out with price in the first quarter of 2020 and turned sharply lower, dropping to the lowest low since July 2017. Buying pressure into June nearly reached the prior peak before rolling over in a steady distribution wave that now threatens to reach the March low.

The stock is poorly positioned below the descending 200-day EMA and failed breakout, indicating that bears remain in charge as we head through the third quarter. It will become harder to mount recovery efforts between now and year end, with the threat of a second wave undermining buying interest. Gravity could take control in this bearish scenario, dropping the hotel giant into a test at the March low.

This Bottom Line

Hilton missed second quarter estimates by a wide margin, indicating that travelers are not willing to risk COVID-19 infection at overnight lodgings.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.