Choice Hotels Makes the Right Call to Drop Pursuit of Wyndham; Wyndham Shares Attractive

We applaud narrow-moat Choice Hotels' decision to halt the pursuit of a merger with narrow-moat Wyndham Hotels & Resorts. We've believed for months that the deal would face regulatory and shareholder hurdles, potentially hindering development for the companies. The market seemed to share our sentiment, sending Choice shares up around 5% during March 11 trading, leaving them slightly overvalued relative to our unchanged $120 fair value estimate. We see a more attractive opportunity for investors to own Wyndham, whose shares were flat on the news, keeping them undervalued relative to our $88 fair value estimate, which is near the valuation Choice had been offering for the hotelier.