Our Stock of the Week is Atour Lifestyle Holdings Limited ADR (ATAT). Atour Lifestyle Holdings Ltd is principally engaged in hotel operations in China. The Company has approximately 834 hotels located across 151 cities in China, with more than 96,969 hotel rooms. Seventeen of the hotels are theme-based and include music, basketball, and literature themes.
Most of Atour’s hotel properties are ‘manchised,’ which means the company franchises and then manages the property. This is a high-margin business and reduces investment risk. Atour has positioned itself as an upper-mid-scale hotel chain that attracts quality-conscious tourists. Because of its widely recognized lifestyle brand, Atour has also expanded its offering to retail products with certain hotel supplies and other products, gaining a rapidly growing revenue stream.
The Company is expected to earn $1.23 per share for 2024 and grow that 28% to $1.63 in 2025. In the third quarter of 2024, revenues jumped 53% to $270.5 million. The stock sells with a trailing PE of 23.
On December 8, 2024, Goldman Sachs initiated coverage of ATAT with a buy rating and a target of $34.40. Goldman states that Atour is one of the fastest-growing chain hotel operators in China, with its hotel count more than tripled, or +30% CAGR from 420 at end-FY19 before the pandemic to 1.5k as of end-Q3 2024, covering close to 200 cities nationwide. Goldman believes the Company is well-positioned to benefit from accelerating industry consolidation trends as smaller, independent hotel operators want to stay competitive through product upgrades and joining chain hotels.
Technically, the stock has been sitting in a trading range since a big run-up in September. Its next earnings report is due at the end of March and may serve as a catalyst for a breakout from this range.
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