It is entirely plausible that economists, investors, stock market experts and others have very different views on the economy and stock market outlook. But when it comes to the travel sector, I think it’s clear that space continues to thrive. Therefore, I really think it’s hard for investors to go wrong buying travel stocks at this point.
Delta (NYSE:DAL) on December 14 increased its fourth quarter guidance in a very bullish sign for the travel sector. Additionally, its CEO, Ed Bastian, said, “Air travel demand remains robust as we exit the year, and Delta’s momentum is building.”
Given that, from Bastian’s statement, it is clear that demand for air travel remains strong and appears to be accelerating, most US travel agencies will experience great success at least in the medium term.
Also note a optimistic statement in august by the CEO of CWT, a company that coordinates business travel. “The demand for business travel and meetings is back in full force, there is no doubt about it,” said Patrick Andersen, the CEO.
And CNBC’s Jim Cramer provided a succinct and witty endorsement of travel stocks earlier this month, who said“The biggest theme is the rise of this ‘life is too short’ mentality. People don’t want to waste their time anymore.
Morgan Stanley, whose outlook on US equities is rather bearish, is nevertheless very optimistic to Hyatt (NYSE:H). The investment bank is bullish on the hotel sector as a whole, as it noted that the U.S. RevPAR (revenue per available room) for the space was higher than in 2019 at the end of last year. Meanwhile, Hyatt’s occupancy levels and prices have risen, Morgan Stanley reported.
Due in part to rising fees and returns to shareholders, Hyatt’s free cash flow per share and valuation will rise significantly, MS predicted last month. Additionally, Morgan Stanley expects the hotel operator’s 2023 EBITDA to be around $1.3 billion. Finally, MS noted that the company intends to increase its total number of rooms by “5%…. over the next two years.
Hyatt tends to cater to the wealthy individuals, the vast majority of whom, in my view, have not been hit hard by high inflation and rising interest rates.
The shares have momentum, as they jumped 23% in the month ending Jan. 23.
Reservation credits (BKNG)
One of the largest online travel agencies in the world, Reserve credits (NASDAQ:BKNG), like Hyatt, is enjoying positive momentum, with its shares soaring 20% in month that ended January 23.
Since it serves countries in the whole worldBKNG can benefit significantly from the reopening of China and the acceleration of economic growth that is currently occurring in Europe.
In the United States, BKNG has a 38% share of the online market hotel booking market, leaving the company well positioned to benefit from the strong rebound in business travel in America.
On December 29, investment bank Tigress Financial issued a bullish note on BKNG stock. The company says travel demand will remain robust and it believes stocks will benefit from a “massive” increase in China’s reopening. Tigress maintained a price target of $3,210 and a “strong buy” rating on the stock.
BKNG has a good lifespan of five years forward PEG ratio of 0.54.
I have long been optimistic about MGM (NYSE:MGM) shares, which I have also owned for many months. As reasons for my optimism on the name, I cited MGM’s substantial leverage on the mighty Las Vegas takeover, the excellent track record of Barry Diller, who invested a lot of money in the company, and the casino owner’s ability to benefit from the growth of sports betting through its joint venture, BetMGM.
Financial research firm Hedgeye recently issued a bullish note on MGM, stating, “We’re getting more positive on the LV Strip.” The company expects Vegas casinos to get a big boost from the return of business conferences to the city and the high number of consumers currently visiting the area.
The investment bank Stifel, which improved shares to “buy” from “hold”. The company expects the company to benefit from its strong database and strong loyalty program, as well as the resurgence of Las Vegas and the rejuvenation of Macau’s Chinese gambling hub.
Meanwhile, New York seeks to allow three casinos to open in the New York area, and there are rumors that Texas, where I currently live, will soon legalize gambling. MGM could gain a foothold in both markets, both of which are huge.
Vail Resorts (MTN)
In a December column, I wrote that Vail Resorts (NYSE:MTN) “should benefit from its focus on the middle class and affluent consumers,” as well as “strong…demand” for skiing.
This prediction appears to have been correct, as the company on January 18 reported that the number of visits to its “North American destination mountain resorts and regional ski areas” increased by 12.5% during the season. skiing in progress compared to the same period a year earlier. Additionally, its “Ski School Revenue,” “Restaurant Revenue,” and “Retail/Rental Revenue” soared 35.6%, 58%, and 34.4%, respectively. one year to the next. Thus, it is among the best travel stocks to buy.
Although the company said that “season-to-date destination guest visits to [its] US western resorts were below [its] expectations” due to the “extreme weather” that led to flight cancellations, I believe the company’s metric increases were still very impressive. Additionally, the firm said some of those who had to cancel visits to its resorts earlier this season would return later in the year.
In the three months ending Jan. 23, MTN is up 16%, showing it has positive momentum, and the shares have an attractive enterprise value to EBITDA ratio of 14.
American Airlines (AAL)
American airlines (NASDAQ:AAL) benefits from the boom in the air sector described by the CEO of Delta, whom I quoted in the introduction to this column.
Earlier this month, AAL said its fourth quarter revenue had jumped 16% to 17% from 2019 levels, up from its previous estimate of an 11% to 13% gain. Even more impressively, the airline now expects its fourth quarter EPS to be between $1.12 and $1.17, compared to its previous guidance of 50 cents to 70 cents and the average estimate. analysts’ previous 58 cents.
Meanwhile, American is well positioned to take market share at South West (NYSE:LUV) after the recent debacle of the latter airline.
Airlines have generally very efficient well recently, as, reporting data from Bank of America, Seeking Alpha reported that “system net sales increased 14.6% from pre-pandemic 2019 levels for the week ending January 8 to continue recent positive trends seen throughout holiday periods.
AAL stock has an attractive striker price/earnings ratio of 7.4. Thus, it is one of the best travel titles to buy.
Given its strong leverage effect on the number of people flying and tourism, Uber (NYSE:UBER) is well positioned to take advantage of the boom in travel stocks in general and the current surge in flights in particular. Additionally, the company, with its Uber Eats unit, is tapping into the food delivery trend, which has grown in popularity in recent years.
Indeed, analysts, on average, wait for sales to jump 16% this year to $36.85 billion, and their average estimate calls for its loss per share to shrink to just 25 cents this year, from $4.87 in 2022.
Their average price target on the name is $45.92, more than 50% above the stock’s current level.
Meanwhile, Goldman Sachs believes that Uber can tap into the increased demand for delivery of goods beyond food. And Uber is finally start to dive its toe in the self-driving pool, as the company has started offering self-driving rides in Las Vegas and is set to expand service to Los Angeles. Of course, using self-driving vehicles rather than human drivers should save Uber a lot of money, especially as the company’s use of self-driving cars grows in the US and beyond. of the.
Trading at a price-to-sales ratio of just two, Uber’s valuation is very attractive at this point.
Like travel stocks like Uber, Airbus (OTCMKTS:EADSY), a major aircraft manufacturer based in Europe, is well positioned to benefit from the airline boom.
Indeed, Airbus, unlike its main competitor, Boeing (NYSE:BA) (which has been plagued by huge execution problems and has been deep in the red for the 12 months ending in September), is already very successful and profitable. In the 12 months to September, Airbus’ net profit was 4.15 billion euros. Additionally, in 2022, the European aircraft maker “…delivered 661 aircraft and received orders for 1,078 aircraft, while Boeing delivered 479 jets and received orders for 774.” TipRanks Noted.
And indicating that overall aircraft demand was quite strong in the fourth quarter, General Electric (NYSE:GE) reported today that orders for its Aerospace unit, which makes aircraft engines, jumped 20% last quarter from the same period a year earlier.
EADSY stock has a reasonable a forward price/earnings ratio of 19 and a “sweetener” dividend yield of 1.25%.
As of the date of publication, Larry Ramer held long positions at MGM and GE. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.