Mizuho analyst Ben Chaiken initiated coverage on the shares of Travel+Leisure Co (NYSE:TNL) with a Neutral rating and a price target of $55.

There are two headwinds for Vacation Ownership Interests (VOI) segment that is making the analyst more cautious, one being accelerating new owner sales and the other being rising interest rates in the financing business, compressing the net interest margin, leading to a $30 million EBITDA headwind in FY24. 

The analyst’s VOI segment EBITDA is marginally lower for FY24: $734 million versus street $738 million and largely in-line for FY25.

Within the Travel & Membership segment, the analyst sees the Exchange business facing structural headwinds stemming from industry consolidation, leading to an effect on overall EBITDA growth.

TNL’s travel club is not gaining the expected traction the market once assumed and the analyst does not see a solution in the making.

While FY24 likely experiences headwinds, the longer term setup is encouraging with VOI new owner mix headwind abating, financing headwind flattening and no obvious tough comparisons, said the analyst.

The target price of $55 applies a 7x multiple to the analyst’s ’25 EBITDA of $972 million plus one year of free cash flow.

Price Action: TNL shares are trading lower by 0.46% at $47.56 on Tuesday. 

Image: Unsplash/ Charlotte Noelle

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