Is Marriott Vacations Worldwide (VAC) a Good Investment?

By Kirsteen Mackay

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VAC stock is the NYSE-listed timeshare company Marriott Vacations Worldwide Corp (NYSE: VAC). As travel picks up you may be tempted to buy shares.

Marriott Vacations Worldwide Corp (NYSE: VAC) is a $7bn timeshare company. Its share price soared in 2020 but languished in 2021. And VAC stock is now down 3.3% year-to-date. Is it worth investing in this travel company in 2022?

What is Marriott Vacations Worldwide?

Marriott Vacations Worldwide Corp. is a global vacation company. It sells vacation homes and engages in rentals, property exchanges, and resort and property management. Company segments include Vacation Ownership and Exchange & Third-Party Management.

The Vacation Ownership segment develops, markets, sells and manages vacation ownership and related products under the Marriott Vacation Club, Grand Residences by Marriott, Sheraton Vacation Club, Westin Vacation Club, and Hyatt Residence Club brands. This segment operates seven brands nearly 120 resorts and serves roughly 700,000 owner families.

The Exchange and Third-Party Management segment serve 1.4 million members, 3,200 exchange resorts and manages over 150 properties. The division comprises exchange networks and membership programs, as well as management of resorts and lodging properties.

Marriott Vacations Worldwide was founded in 1984 and is headquartered in Orlando, Florida.

How does Marriott Vacations Worldwide make money?

Marriott Vacations Worldwide makes money selling and renting vacation properties. It also generates revenue from service contracts and fees from interest payments on financing loans.

VAC Financial Overview and Metrics

  • P/BV: 2.4

  • P/S: 2

  • Forward P/E: 16.2

  • Market cap: $7bn

  • Dividend yield: 1.3%

Marriott Vacations Worldwide Q3 2021 Highlights:

  • Net income: $10m

  • EPS: $0.23 fully diluted

  • Adjusted Net income: $70m

  • Adjusted EPS: $1.60

  • Consolidated Vacation Ownership contract sales: $380m

  • Cash on hand: $448m

The arrival of the Omicron variant of COVID disrupted travel occupancy in key resorts. Nevertheless, contract sales are recovering, and bookings are up.

Stephen P. Weisz, the CEO and Director of Marriott Vacations Worldwide, said:

“First time buyers represented more than 30% of contract sales in the third quarter, which is important for the long-term health of the system. The fourth quarter has started well with October contract sales above 2019 levels and reservations on the books for the first half of next year are already strong.”

VAC Stock: $201 Price Target from Truist Securities

C. Patrick Scholes, Managing Director at Truist Securities, recently reiterated his Buy rating on VAC stock. He has a target share price of $201, implying a 22% upside.

What is the difference between MAR and VAC stock?

Marriott International (MAR stock) was the parent company of Marriott Vacations Worldwide Corporation (VAC stock). But the Marriott International Board approved the spin-off of VAC in 2011.

Since then, VAC stock has soared over 842%.

MACRO Outlook

Travel and vacation stocks have endured a volatile couple of years. The COVID-19 pandemic hammered the industry, but the hope of a reopening has kept many share prices elevated.

With inflation rampant, people may not be able to afford to travel as much as they’d like. Plus, soaring costs will pressure company margins.

Rate hikes are expected later this year, which is generally bearish for stocks. And the rumblings of a potential Russian invasion into Ukraine could also reduce people’s willingness to travel.

Is VAC a good investment?

It’s always a good sign when management is committed to the company. Stephen P. Weisz, the CEO and Director of Marriott Vacations Worldwide, has been with the company for over 25 years.

Over the years, the business has grown organically with recurring cash flow thanks to its focus on efficiently managing its inventory. The company has expanded the number of resorts in its portfolio and confidently made acquisitions. For instance, in 2018, Marriott Vacations acquired luxury vacation home company ILG and early last year, it purchased the Welk Resorts portfolio.

Marriott has been conscious of shareholder support, rewarding them with stock buybacks.

Marriott Vacations does face rising competition, particularly from the likes of Airbnb (NASDAQ: ABNB). However, many people still love the luxury getaway offerings Marriott provides. Furthermore, it is a proactive company happy to adapt to changing trends.

Indeed, one of the most appealing aspects of VAC stock is its scope for growth.

Better still, its revenues have continued to grow despite recent macro challenges.

While focusing on creating remarkable vacation experiences, the group plans on launching new products and new digital tools to keep customers engaged and attract new business. 

Stephen P. Weisz, the CEO and Director of Marriott Vacations Worldwide, said:

"While we have seen a modest impact in January related to Omicron, forward looking trends remain strong, illustrating the resiliency of our leisure-focused business model,"

VAC is expected to release its Q4 2021 earnings after the market closes on 23 February, followed by a call the next day.

If you’re interested in travel and vacation stocks, why not view our Airbnb content.

We’ve also produced in-depth reports on ESG investing and Healthcare investing. Or check out our 12 investing themes for 2022.

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Topics:
Travel
Industries:
Consumer Discretionary
Companies:
Marriott Vacations Worldwide

Author: Kirsteen Mackay

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

Kirsteen Mackay does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the above article.

Kirsteen Mackay has not been paid to produce this piece by the company or companies mentioned above.

Digitonic Ltd, the owner of ValueTheMarkets.com, does not hold a position or positions in the stock(s) and/or financial instrument(s) mentioned in the above article.

Digitonic Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.

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