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Why Shares of Hilton Worldwide Holdings Inc Plunged in January

By Travis Hoium – Feb 6, 2016 at 7:46AM

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Investors took a pessimistic view of this hospitality stock last month.

What: Shares of Hilton Worldwide Holdings Inc (HLT -2.83%) dropped 20% in January, according to S&P Capital IQ data, as economic worries weighed on investors.

So what: As the month of January started, there was a lot of worry among investors about the global economy. China's growth is clearly slowing and the ramifications of slowing growth is unknown, giving investors jitters. There's even a growing concern the U.S. may enter a recession in 2016, even if it's a shallow one.

That economic concern drove analysts at MKM Partners to downgrade Hilton Worldwide stock to a sell rating with a $16 price target, triggering a sell-off mid-month.  

Now what: Hilton has been a big beneficiary of steady economic growth and increased business activity over the past six years, but the growth cycle appears to be sputtering at the moment. That could mean falling demand overall and customers who are a little less likely to take a vacation or spend big on their hotel stay. With shares still trading at 23 times earnings, even after January's drop, the stock may have gotten ahead of itself from a valuation perspective. Investors eyeing the stock might want to look for a lower entry price because neither the P/E ratio or the 1.6% dividend yield look like a steal in a slow-growth hospitality environment.

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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