Both GDS Holdings and China Lodging reported their latest quarterly results yesterday, GDS before the open and China Lodging after the close. There will be a complete portfolio review delivered tomorrow after the market closes, but we wanted to give you our thinking as soon as possible.
Investors haven’t responded well to either report, with China Lodging (HTHT) taking a bigger hit. Analysts were expecting China Lodging to report revenue of $344.5 million and earnings of 73 cents per share. But the actual numbers were $340.1 million in sales and EPS of 52 cents.
HTHT opened sharply lower and hasn’t shown any sign of making up its gap down; volume is heavy, running about five times average.
We have little doubt that China Lodging will be a long-term winner, which is one reason we have stuck with the stock through a November correction and another in January/February. But neither of those corrections came on exceptionally heavy volume and neither featured a huge gap down.
We have had HTHT rated Hold a Half, but we will now sell our remaining half position and book our substantial profit. SELL.
We are also keeping a close eye on GDS Holdings (GDS), which is down around 8% for the day. But GDS is still above its 50-day moving average and holding within the trading range it’s occupied since January. We’ll keep it rated Hold for now but will tighten its leash a little. HOLD.