Hilton (HLT) Stock Basing for Post-Pandemic Recovery

Global hospitality giant Hilton Worldwide Holdings Inc. (NYSE: HLT)  saw its shares plunge (-62%) off its Feb. 12^thhighs on the COVID-19 pandemic hitting lows of $44.30 on Mar. 18^th, 2020. The stock has since staged a rally with the  S&P 500 (NYSEARCA: SPY) heading into earnings season. While government-imposed lockdowns have frozen the travel and leisure industry, some industries are faring better than others. Hotels and restaurants have caught bids while airlines, cruise ships, and autos continue to stagnate despite crude oil prices hitting multi-decade lows and even going negative for the first time in history on the March 2020 settlement expiration. The company has been taking proactive measures to shore up its financials preparing for a post-pandemic recovery that investors may find compelling enough to scale in at opportunistic entry levels.    

Hotel Industry Stats March 2020

On April 2, 2020, Smith Travel Research released its U.S. hotel industry data for the week ending March 28^th, 2020. Domestic hotel occupancy was down (-68%) year-over-year (YoY) with a (-39%) drop in pricing YoY. Revenue per available room fell (-80%) for the week.

Bolstering Cash Reserves

Hilton Domestic Operating Company, an indirect subsidiary of HLT, boosted its senior notes offering to $1 billion from $500 million closing April 21, 2020. The offering consists of $500 million of the 5.375% Senior Notes due 2025 and $500 million of the 5.750% Senior Notes due 2028. Proceeds of the offering are intended to be used for general corporate purposes. Industry peers include Marriott International (NASDAQ: MAR) , Wyndham Hotels & Resorts (NYSE: WH) and Choice Hotels International (NYSE: CHH) .

Hilton Q1 2020 Update

While Hilton reports their complete Q1 2020 earnings pre-market on April 29^th, the company did provide a preliminary Q1 update on April 16^th. While January RevPAR improved up 1% in January, the decline started in February at (-4%) and down (-56%) to (-58%) in March 2020. Occupancy rates are currently around 17% domestically and 13% for the EMEA region. China is healing with occupancy rates recovering back to 22% from a low of 9%. The company reported that global travel restrictions and stay-at-home directives have resulted in the shuddering of partial and complete hotel operations throughout the world. Hilton is finding alternative uses for hotel properties that include providing housing for first responders and healthcare workers. The company can’t provide any predictions on when operations will return to pre-outbreak demand or pricing. They also noted that travel demand will continue to be adversely affected by higher unemployment rates, income level declines and loss of personal wealth from the impact of COVID-19. Investors are concerned as to when operations will return to normal operations.

Shaping the Post-COVID-19 Narrative

The bullish narrative for Hilton and the hotel industry would follow the China template of improving occupancy rates as regions return back to pre-COVID-19 conditions. The gradual re-opening of economies as travel and isolation restrictions ease up on a rolling basis can improve sentiment. Major event and convention bookings rising again for 2021 would further mend sentiment. On April 20^th, Casino operator Wynn Resorts (NASDAQ: WYNN) took  the proactive approach of releasing a 23-page blueprint for the process of re-opening of its Las Vegas properties, contingent on easing of stay-at-home restrictions.

States Reopening After Stay-At-Home Order Expirations

Many stay-at-home orders are approaching expirations at the end of April into May, with many states planning a phased-in approach to reopening businesses. Nevada’s stay-at-home order expires on April 30^th, Governor Steve Sisolak plans to reopen the state “soon”.  Georgia Governor Brian Kemp announced on April 20^th, that some businesses including hair salons, gyms and elective surgeries would resume on April 24^th. Mississippi plans to reopen for business on April 27^th when the stay-at-home order expires. Montana plans a phased opening upon April 24^thexpiration of stay-at-home orders.  Ohio plans to reopen on May 1^st stay-at-home expiration in a “phased-in” approach. Utah stay-at-home expires May 1^st, Governor Gary Herbert hopes to reopen in three phases starting with sit-down dining and gyms.

Opportunistic Buy Levels

Using the rifle charts on wider time frames to lay out the playing field is suitable for swing traders and investors. The weekly rifle chart formed a market structure low (MSL) buy trigger above the $78.65 Fibonacci (fib) level. The stochastic has started its bounce off the 20-band with a bullish mini pup with support at the 5-period moving average (MA) at $68.29. If the weekly MSL triggers, then the upside trajectory towards the weekly 15-period MA near the $88.17 fib is targeted. However, a breakdown of the weekly 5-period MA below the $67.30 fib could set-up an inverse pup breakdown to the $60.06 to the $56.31 overlapped fib cluster, which overlaps with the monthly lower Bollinger Bands (BBs). From this roadmap, here are four opportunistic entry levels: $67.30 fib, $60.06 gatekeeper fib, $56.31 monthly lower BBs/super fib and $53.67 fib. Traders can use these and in-between fib levels to scalp reversions utilizing intraday time frames. Swing traders can scale for overnight to multi-day holds on converging daily/60-minute stochastic. Longer-term investors may consider a pyramid sizing dollar-cost averaging approach with a covered call strategy to buffer downdrafts.