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Why Marriott's stock has surged after 500 million of its customers got hacked

Brian Sozzi

Marriott’s (MAR) investors have quickly moved beyond its major November 2018 hacking incident. Their apparent focus: the hotel giant’s strong long-term growth plans.

“The markets are funny things. I actually think that markets tend to look through one time events with fairly good wisdom, whether that’s a cyber event, a lawsuit or something else — investors have looked beyond this [hacking] crisis,” Marriott President and CEO Arne Sorenson told Yahoo Finance.

Back in November 2018, however, that willingness by investors to overlook such a material event was highly unclear. Marriott said Starwood’s — a brand it plunked $13.4 billion to buy in 2016 — guest reservation system had been hacked. The company revealed hackers had gained unauthorized access to the Starwood system dating back to 2014.

About 500 million guests had their personal information exposed.

Sorenson said Marriott may never find the source of the hack, though some in the U.S. government have blamed China. Nor has it detailed the potential cost to satisfy the lawsuits that have followed the incident. The UK Information Commissioner's Office recently disclosed its intention to fine Marriott about 100 million pounds due to the cyber hack. Sorenson said Marriott believes that amount is too “high” and will contest it.

After following an initial dip in the stock in the weeks following the cyber disclosure, Marriott’s stock has shot up more than 25%. That’s roughly three times the performance of the S&P 500.

“I think the consumer reaction is a bit different [than the market’s]. We take full responsibility for this, it’s an awful thing. It happened to the Starwood system, but we can’t pretend we aren’t on the hook for it,” Sorenson explained.

Consumers are ‘deadened’ to cyber attacks

In this photo illustration, the American multinational diversified hospitality company Marriott International logo is seen displayed on an Android mobile device with a figure of hacker in the background. (Photo Illustration by Miguel Candela/SOPA Images/LightRocket via Getty Images)

“I think even while we take responsibility for it, one of the things that is interesting — but not surprising —when you stand back and think of it, is that we as consumers have become a little deadened to this because there have been so many cyber hacks,” said Sorenson. “It’s not that we don’t care about it anymore, but it’s not as shocking as it probably was before.”

To Sorenson’s point, Marriott’s financials since the hack have been generally well-received by Wall Street. So, too, have the company’s growth plans laid out at an analyst event several months ago.

Marriott has told Wall Street it will add a whopping 275,000 to 295,000 new rooms by 2021. Those rooms are expected to add $400 million in sales and bring earnings to a range of $7.65 to $8.50 a share by 2021.

Marriott’s adjusted earnings in 2018 tallied $6.21 a share.

In total, Marriott has more than 2,800 hotels in its development pipeline representing about 475,000 rooms. That’s by far the most aggressive development pipeline in the hotel industry.

Brian Sozzi is an editor-at-large and co-host of ‘The First Trade’ at Yahoo Finance. Follow him on Twitter @BrianSozzi

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