Deutsche Bank Sees Buying Opportunity in 3 Leisure Stocks After August Sell-Off

Deutsche Bank has highlighted three Buy-rated stocks in the lodging and leisure sector, suggesting that a broad-based selloff in August has created an attractive entry point for investors. In a recent research note, the bank pointed to significant valuation compression in the sector that may not be justified by underlying business fundamentals.

Valuation Pullback Creates Opening

The bank's core thesis is that several lodging and leisure stocks have seen their valuation multiples contract by a full turn or more from their summer highs. Deutsche Bank analysts argue that this de-rating, particularly for lodging real estate investment trusts (REITs), appears overdone when compared to the companies' recent performance and outlook.

This pullback has presented a potential opportunity in names that continue to report strong results. All three companies highlighted by the bank recently posted quarterly earnings and revenue that surpassed Wall Street expectations.

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Deutsche Bank's Top Picks

Deutsche Bank identified the following companies as being well-positioned after the recent downturn:

• Travel + Leisure (TNL): The bank's top pick in the group, with a price target that implies approximately 45% upside. TNL recently beat second-quarter revenue estimates and raised its full-year outlook.
• Host Hotels & Resorts (HST): The bank sees about 31% upside to its price target for this lodging REIT. It noted that the pullback in lodging REITs has been excessive relative to cruise lines and pointed to HST's strong second-quarter results and increased full-year adjusted EBITDAre guidance.
• Ryman Hospitality Properties (RHP): The price target for RHP suggests roughly 26% upside. Deutsche Bank believes the fundamentals for lodging REITs have not deteriorated to the degree implied by the stock's recent performance. Ryman also topped second-quarter expectations and recently launched a share offering to fund an acquisition.