Shares of hotel real estate investment trust (REIT) Ashford Hospitality Trust (NYSE:AHT) rose roughly 12.5% in June according to data from S&P Global Market Intelligence. That sounds great at first blush, but the truth is it also fell just over 30% from the highs it achieved early in the month. So, depending on your time frame, June could have been a good month or a terrible one.
The big story with Ashford Hospitality is really the volatility of the stock. The shares were in rally mode when June began, rising as much as 60% before turning around and plummeting so that the gain was limited to just 12.5%. There wasn’t much news out of the company during the month, beyond a couple of media appearances. But there was something telling in that, noting that, in a June 15 interview, CEO Rob Hays highlighted reaching out to shareholders via Twitter because the majority of the stock was owned by retail investors.
What’s going on? Ashford Hospitality Trust became a favorite name on Reddit message boards, which hyped the stock, resulting in a wild rally. When the emotional tides turned, the shares fell. The phenomenon is simple, if perhaps frightening to conservative investors, and it’s been seen in various stocks across the market lately. In other words, the ups and downs here were largely driven by stock speculators.
But there were some signs of good news in Hays’ comments. During the June 15 interview, for example, the CEO noted that vacation travel was coming back strongly. That’s a good thing when you consider that full-year 2020 revenue was down by 66%. That weakness broadly continued in the first quarter of 2021, with revenue off by about 59%. Hopefully, based on the comments, the REIT will start to show more material improvement in the coming quarters even though business travel continues to lag. Still, given that the quarter-over-quarter comparisons to 2020 should be fairly easy for the rest of 2021, it stands to reason that year-over-year results will look better from here — even if they still aren’t “good” by 2019 standards.
Ashford Hospitality Trust’s business is likely starting to turn a corner, but things aren’t even close to being normal yet. In fact, in early July, the company announced a 1-for-10 reverse stock split, which is something that is often done when a company is struggling and its share price is low. That’s not a great sign and most long-term investors will probably want to remain on the sidelines here for a little longer. Indeed, it’s probably more prudent to watch the Reddit boards have their fun and wait for more concrete proof that Ashford’s business is getting back on track.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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