NEW YORK (TheStreet) -- Starwood Hotels & Resorts (HOT) is poised to surpass its 5% gains this year, analysts say, benefiting from the spinoff of its time-share business and speculation it may acquire a competitor or be bought out.
The speculation began in April when Starwood Chairman Bruce Duncan said the board would conduct a strategic review and that no option for increasing shareholder value is off the table. The disclosure followed the February announcement that Frits van Paasschen would resign as CEO and that Adam Aron, who had been serving on the board since 2006, would hold the post in the interim.
Starwood, based in Stamford, Conn., also said in February that the time-share business, which generated $640 million of last year's $5.98 billion in revenue, would be turned into a separate publicly traded company. The plan mirrors the setup at time-share company Marriott Vacations Worldwide (VAC - Get Report), which trades separately from Marriott International (MAR - Get Report).
"The spinoff is encouraging" because it moves the company closer to its goal of greater reliance on managing properties rather than owning them, said Morningstar analyst Dan Wasiolek. "Wall Street tends to reward companies that have a higher mix of managed properties, which tend to be more stable and can withstand downturns in the economy or hotel industry."
Starwood's stock price of $85.70 is about 27 times higher than per-share earnings last year, a discount to the multiple of 29 at Marriott, according to data compiled by Bloomberg.
Plus, Marriott relies more on managed properties. Just 7.4% of its total 2014 revenue of $13.8 billion stemmed from properties it owns, compared with Starwood's 26%.
Jim Cramer's charitable trust, Action Alerts PLUS, owns Starwood and expanded its position by 400 shares on Tuesday.
"We see some interesting structural catalysts given the pending spinoff of its time-share business and current examination of strategic and financial alternatives," Cramer, the portfolio manager, and research director Jack Mohr wrote. "We are bullish on the name and see a path to $100 in the medium-term."
Consolidation "makes a lot of sense in the lodging industry," said MKM Partners analyst Chris Agnew, who maintains a neutral rating with an $86 price target on Starwood.
"Starwood could buy La Quinta (LQ) or there's always private money in Asia," he said. "I think a merger with InterContinental Hotels Group (IHG) makes the most sense because of geographical overlap. And InterContinental has higher-end properties, as does Starwood."
He also points to tax advantages from a merger between InterContinental and Starwood, as InterContinental is headquartered in the United Kingdom.