UBS has upgraded Intercontinental Hotels Group PLC (LSE:IHG), the hotel operator, to 'buy' from 'neutral', raising its price target to $188 from $157.65.
The broker said IHG's shares, up 2% at 1$59.10, now trade at a discount to certain peers despite its strong long-term track record in global lodging.
Earnings have compounded at around 9% annually over the past decade, while the company has returned approximately $8.5 billion (about £6.3 billion) to shareholders through buybacks and dividends.
UBS said the shares now trade at a 3% discount to Hilton, a gap it believes should close given IHG's earnings growth outlook and exposure to recovery markets such as China and the Middle East.
The broker raised its 2026 revenue per available room growth forecast to 3.5% and its net unit growth forecast to 5.0%, lifting 2026 and 2027 earnings per share estimates by around 4%.
The new price target is based on 18 times 2027 estimated enterprise value to earnings before interest, tax, depreciation and amortisation, above IHG's long-term average of around 16 times.
UBS said this premium is justified by the company's asset-light business model, visible medium-term earnings growth and scope to return more than $4.5 billion (about £3.33 billion) to shareholders by the end of the decade.
