PEB

Pebblebrook Hotel ($PEB) CEO Buys $3M Despite Stock Plunge... Extreme Undervaluation at P/B 0.42 Draws Attention

05/28/2025 21:14

Chairman Jon Bortz of $PEB (Pebblebrook Hotel Trust) has been aggressively purchasing shares worth approximately $3 million over the past year despite significant stock price declines, drawing investor attention with his latest acquisition of 6,000 shares for $54,000 on May 27th. Pebblebrook, an $1.1 billion market cap hotel REIT, operates 46 lifestyle hotels across 13 key urban and resort markets in the United States with approximately 12,000 guest rooms. The company competes with Summit Hotel Properties, Park Hotels & Resorts, and Host Hotels & Resorts, differentiating itself through a specialized portfolio of upscale lifestyle hotels. Bortz's insider trading pattern has been particularly noteworthy. His buying spree began in June 2024 when shares traded around $14, and intensified as prices declined. When shares dropped to $11-12 in August 2024, he purchased 96,000 shares for $1.15 million. In March 2025, as prices fell to $10-11, he bought 68,000 shares for $720,000, and most recently in May, with shares trading at $8-10, he acquired 116,000 shares worth $970,000. This consistent buying pattern signals strong management conviction. Directors Michael Schall and Ron Jackson have also purchased 20,000 and 10,000 shares respectively, indicating board-wide confidence in the company's future prospects. The company's financial performance presents a mixed but improving picture. Recent quarterly results have consistently beaten analyst expectations, with Q3 2024 revenue of $404.5 million up 2.2% year-over-year and Q4 2024 revenue of $337.6 million growing 1.1%. Notably, RevPAR (Revenue Per Available Room) growth has consistently exceeded analyst forecasts, demonstrating operational efficiency improvements. Despite reporting a net loss of $51.4 million over the trailing twelve months—largely due to non-cash charges typical in REITs including depreciation—the company generates strong levered free cash flow of $200.9 million, ensuring adequate liquidity for dividend payments and operations. Pebblebrook's valuation metrics appear compelling. With a price-to-book ratio of 0.42 and price-to-sales ratio of 0.76, the stock trades at significant discounts to industry averages. This reflects broader market caution toward hotel REITs while suggesting substantial undervaluation at the individual company level. The hotel industry faces headwinds, as Wells Fargo recently cut price targets for U.S. lodging REITs citing pressured consumer spending and cautious revenue growth expectations for the leisure segment. The S&P 500 Hotel & Resort REITs sub-index has declined significantly, reflecting sector-wide concerns. However, recent trade developments provide positive catalysts. President Trump's delay of the planned 50% tariff hike on EU imports has accelerated trade negotiations and eased fears of a trans-Atlantic trade war. This contributed to a rebound in U.S. consumer confidence in May, with the Conference Board's index rising from 85.7 to 98 after five months of decline. Pebblebrook's portfolio composition positions it well for recovery. The mix of urban and resort lifestyle hotels allows the company to benefit from both business travel recovery and leisure demand increases. The focus on upscale lifestyle properties enables premium pricing and enhanced customer loyalty compared to traditional hotel operators. Near-term catalysts include the upcoming earnings release expected in late July, which will reveal whether Q2 results can maintain the positive momentum from Q1. Management guidance for the second half of 2025 will be crucial for determining stock direction. Long-term considerations include the debt-to-equity ratio of 95.82%, which could pose refinancing risks in a rising rate environment. However, given current low rates and stable cash flows, this leverage appears manageable. The ongoing share accumulation by management at these depressed levels demonstrates strong conviction in shareholder value creation potential.

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