Is Ashford Hospitality Stock a Buy Right Now?

Ashford Hospitality stock gained a massive 228 percent on Nov. 9. However, despite the spike, the stock is still down 83 percent for the year. Is AHT a good stock to buy despite the surge on Nov. 9? 

Ashford Hospitality Trust is a REIT based in Dallas. The company invests in upscale hotel properties and has brands like Hilton, Marriott, Crowne Plaza, Hyatt, Sheraton, and Courtyard under its portfolio. In 2020, the COVID-19 pandemic has taken a toll on the hospitality sector.

Looking at Ashford’s third-quarter earnings that were released last month, the company reported revenues of $93 million—down 75 percent from the same quarter last year. AHT reported a net loss of $109 million in the quarter. To put that figure into perspective, even after tripling on Nov. 9, AHT stock had a market capitalization of only about $69 million.

AHT’s financial position is very precarious. The company had cash and cash equivalents of only $120.9 million and restricted cash of $89.5 million. Ashford Hospitality reported adjusted funds from operations of -$62.3 million in the quarter. Also, the company had mortgage loans of about $3.7 billion at the end of the third quarter.

Looking at the cash burn rates, Ashford would have to look at raising more cash to fund its cash burn. The current cash holdings might not last more than a few quarters. However, looking at the current markets, there aren't many avenues available for the company to raise cash.

On Nov. 9, there was a bounce-back in the beaten-down stocks that have been hit badly by the coronavirus pandemic. Positive news flow about Pfizer’s vaccine candidate led to a sector rotation on Nov. 9. Investors exited the so-called “stay-at-home” stocks and took positions in companies that would benefit most if there's a coronavirus vaccine. 

The hospitality, aviation, and entertainment sectors would benefit if there's a coronavirus vaccine. However, there wasn't specific news about AHT stock on Nov. 9. AHT stock was trading over 10 percent lower in pre-market on Tuesday, Nov. 10 after the gains.

AHT stock is a bet on the COVID-19 vaccine. If there's a vaccine soon, it could lead to more upside in AHT stock. However, if there isn't a successful vaccine soon, AHT could find it hard to continue its operations. There has already been a wave of bankruptcies among mall operators due to lower revenues.

AHT is a penny stock and has a very high-risk profile. Investors should only consider the stock if they are comfortable with high risk including a complete loss of capital. However, AHT stock could be a good way to play the COVID-19 vaccine and the reopening story.