With a sudden -2.2% drop to $267.77, Hilton Worldwide has Wall Street wondering if its shares will keep moving past its target price of $264.24. With an average rating of buy, and analysts assigning target prices from 223.0 to 306.0 dollars per share, investors will be betting heavily on the Lodging stock's next move.
The market seems to share this optimistic view, since Hilton Worldwide has a short interest of only 4.3% (this is the percentage of the share float that is being shorted). Each short position represents an investor's expectation that the price of the stock will decrease in the future.
Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.
One way to get an idea of the market sentiment on a stock is to check its rate of institutional ownership. In the case of Hilton Worldwide, institutional investors own 98.9% of the shares, which indicates they have a very high stake in the company. What does this really tell us?
Institutional investors such as hedge funds, investment firms, and wealth managers devote significant resources to identifying good investments. If they have decided to invest in HLT, it probably means they believe it is a solid investment choice.
But it could also mean they are buying up shares in an effort to acquire the company or to get seats on the board of directors. Also bear in mind that institutions are fallible (just maybe not quite as fallible as the average retail investor), so they may simply be wrong when they think they've found a good stock.
To sum up, Hilton Worldwide is probably the subject of positive market sentiment because of an analyst consensus of little upside potential, a buy rating, an average amount of shares sold short, and a significant number of institutional investors. At Market Inference, we believe that any investment decision should be preceded by an in-depth analysis of the company's fundamental values and a comparison with similar stocks.
Here's a snapshot of some important facts to keep in mind about HLT:
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The stock has trailing 12 month earnings per share (EPS) of $6.33
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Hilton Worldwide has a trailing 12 month Price to Earnings (P/E) ratio of 42.3 compared to the S&P 500 average of 29.3
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Hilton Worldwide is a Consumer Discretionary company, and the sector average P/E and P/B ratios are 20.93 and 2.93 respectively
