Unusual Options Activity In Marriott
Marriott International, Inc. operates, franchises, and licenses hotel, residential, and timeshare properties worldwide. It operates its properties under the JW Marriott, The Ritz-Carlton, W Hotels, Sheraton, Delta Hotels, Fairfield by Marriott, etc. As of February of 2020, it operated approximately 7,300 properties under 30 hotel brands in 134 countries and territories.
Best Western Hotels and Resorts CEO David Kong recently characterize the hospital industry as total devastation as revenue has dropped 90%. I truly don’t understand all the upgrades in the hotel sector. Let me give you some more stats.
As of April 8, nearly 8 out of 10 hotel rooms were empty across the country
Since the public health issue began escalating in mid-February in the U.S., hotels have already lost more than $10 billion in room revenue.
Based on current occupancy estimates for the immediate future and historical employment impact rates, nearly 3.9 million total jobs have either been eliminated or will be eliminated in the next few weeks.
Individual hotels and major operators are projecting occupancies below 20% for upcoming months.
Yet last week, Wyndham Destinations, Las Vegas Sands and Choice Hotels were upgraded by a Wolfe Research analyst. The analysis said leisure and drive-related travel will outperform business and air travel after the coronavirus pandemic subsides. Marriott International was upgraded as well by Dori Kesten of Wells Fargo analyst from equal weight to overweight.
Hilton’s balance sheet has $8 billion in long-term debt at the close of 2019, with about $15 billion in assets. But what the company did last week was borrow $2 billion to increase their cash reserve in order to deal with all the COIVD-19 uncertainty.
I really don't get all the upgrades as I have noticed unusual bearish options activity in several hotels within the past week.
Regarding Marriott, the Smart Money bought over 13,000 of the May put options at the $45 strike price, equivalent to the March lows.
What's interesting about this play, along with the other plays is that they are right around earnings. In the case of Marriott, the Smart Money is expecting an almost $50 drop in price in about 4 weeks. However, the chart suggest price will be selling at a discount at the monthly demand at $27.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
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