The fast rising AHT stock refers to Ashford Hospitality Trust Inc, a real estate investment trust that like its name suggests operates in the hospitality sector. It owns many hotel franchises that are branded under upper-scale names like Hilton, Hyatt, Marriott, and Intercontinental Hotel Group.
If you’re looking for an inexpensive stock to buy today amongst the deep list of penny stocks, AHT which trades on the New York Stock Exchange, should be on your radar. Of course, one cannot just recommend a stock to buy without providing the rationale for doing so, and here, I’ll be providing the reasons for recommending it.
To start, we should know that 2020 was a year that wasn’t favorable to the hotel industry. The pandemic massively led to a downturn for many hotel operators as global travel was restricted and people got discouraged from going to public spaces to avoid getting infected.
So, if AHT is a major hotel operator and was a victim of the downturn, why is this article recommending it?
Yes, AHT was a victim of the downturn and thus saw its stock fall heftily from around $28 at the beginning of 2020 to less than $3 at the end of the year. Below is a chart representation of its stock for that period, showing a broad slump.
But, you may be aware of that famous Warren Buffett quote – to be “fearful when others are greedy, and greedy when others are fearful.” It very much applies here.
After a slump, the hotel industry is gradually recovering thanks to widespread vaccinations that are curtailing the Covid-19 pandemic and thus opening up global travel. Also, with widespread vaccinations, people are now feeling safer going out to public spaces, and hotels are one of the main such public spaces.
After being a victim of the downturn, AHT will now be a beneficiary of the gradual recovery of the hospitality market. Thus, after falling very low to a current price of nearly $6, It’s very likely that the company’s stock will
gradually rise to pre-pandemic levels over time, providing an opportunity for investors to get significant profits.
It’s like that popular saying of “buy the dip” very much applies here. It wouldn’t be surprising that Ashford rises from its current price of around $6 to pre-pandemic levels of sub-$30 over the next year.
For recommending AHT stock, I’ll provide you with some analysis of the company’s business to back up the recommendation.
What makes AHT a rising stock
AHT operates hotels, and that’s a very competitive environment. For reference, if you live in a city, there are likely many hotels that you’ve come across. With this much competition, the way to win is to differentiate yourself and AHT has a solid way of doing that.
AHT’s major advantage is that its hotels are franchised under upper scale brand names like Hilton, Hyatt, Marriott, and the likes. These names confer much value to everyday customers with the budget to afford premium hotels and thus lure more customers than generic brands.
For being focused on upscale, full-service hotels, AHT has a better advantage in recovering from pandemic lows compared to general hoteliers.
AHT has around 100 upscale hotels scattered across the US, a country that has fully vaccinated 137 million of its citizens and has at least 70% of its adult population partially vaccinated. For that, if there’s any country where the hospitality industry is bound to recover quickly, it’s in the US, and the fast rising stock AHT has a major advantage here.
As the pandemic struck, AHT’s management team worked around the clock to sustain the business. Its actions included suspending dividends due to low cash flow, securing forbearance agreements on $3.6bn of loans, and getting capital commitments of $450mn to maintain liquidity.
For the actions instituted by AHT’s team, the company broadly reduced the damage it would have taken from the pandemic which is a sign of good corporate strategy.
Also, AHT has materially reduced its monthly cash utilization, handed back several unprofitable assets to lenders, and utilized its equity trading on the public markets to shore up liquidity.
Generally, it shows that AHT has a good corporate strategy spearheaded by forward-thinking managers, and this is another reason the company is possibly bound to recover from the pandemic quickly compared to its competitors.
A well put corporate strategy is another reason AHT is expected to have a bright future in the near-term.
To start, let’s look at AHT’s revenue stats pre-pandemic compared to post-pandemic. In the three months ended March 31, 2020, it reported $281 million in revenue. A year later, its revenue fell to $116 million, less than half of the earlier year.
From its revenue stats, it’s obvious that AHT was majorly affected by the pandemic. However, it would be logical to predict a steep recovery for its earnings as the hotel industry gradually recovers. Based on the numbers, the firm’s revenue could recover to pre-pandemic levels in a year or two’s time, and that’s a major catalyst for stock price growth.
For its next fiscal year ending March 31, 2022, analysts polled by research site WallstreetZen predict that AHT’s earnings-per-share will be $0.40 on average compared to a negative (-)$0.96 in 2021.
This suggests a very strong earnings outlook for AHT.
AHT reported having $3.4 billion in net real estate assets and $225 million of cash at hand at the end of March 2021. At the same time last year, it also reported $3.4 billion of net real estate assets but a much lower cash balance of $93 million. This time, its higher cash balance came from drawing debt facilities it had secured.
At March ending, AHT’s deficit was $3.9 billion compared to $3.7 billion in the same time of the past year.
With the above figures, it’s clearly seen that AHT’s financial health has stayed quite stable even after the woes of the pandemic. It’s a testament to the good corporate strategy we noted above.
For being stable in the midst of shaky grounds that saw many hotel operators go bankrupt, AHT has a much better shot of recovering from the pandemic.
Recently, AHT has seen a strong uptick in its trading volume. Have a look at the bar chart below comparing its trading volume at the beginning of this year in January to the recent months of May and June.
It seems that there are many traders that have taken notice of AHT’s stock just like we’re recommending to you. You can see from the above chart AHT’s daily trading volume soaring from low-digit millions at the beginning of the year to sub-100 million in recent months.
In the world of stocks, higher trading volume is higher demand and tends to increase a stock’s price. It also provides a better opportunity for people to sell their investments if they make a profit.
AHT’s soaring trading volume is a good one for the stock and yet another reason we recommend it as a cheap stock to buy for high growth potential. It’s a big catalyst serving as our rationale for recommending it.
The Future of AHT
In this bull market, AHT has many signs of being a stock with good growth potential as argued for with the points above. Publicly traded real estate investment trusts are one too many but AHT is one of the few standing out at this time.
This is a unique time to invest in the rising AHT stock in the firm’s 18-year history of trading on the public markets. Simply put, the stock dipped due to external forces acting on the markets, the Covid-19 pandemic in its case, and with the effects of the pandemic now gradually fading off, that same force can lead to a major rise.
Currently trading at $6.15, AHT has a strong opportunity to ride the waves of a recovering hospitality market. Considering all the aforementioned information this rising stock could possibly see $10 in the near future.