The outlook for the future of the travel industry remains uncertain. The pandemic is yet to subside in the United States and internationally, making it doubtful whether the travel industry will witness a complete recovery in 2021. However, the industry has received some investor attention lately with the positive vaccine news dominating headlines. Arrival of effective coronavirus vaccines could help the industry rebound next year. But nothing is certain yet and people looking to invest in the travel industry need to be selective and careful.
Stocks like Booking Holdings, Inc. (BKNG) and Expedia Group, Inc. (EXPE) look more promising than their peers. These stocks have seen a significant recovery since the sharp drop that took place at the beginning of the pandemic. These stocks have an agency-based business model and any recovery in the travel industry would spell growth for them.
However, stocks like Carnival Corporation (CCL) and American Airlines Group, Inc. (AAL) have not performed as well since the mid-March crash. These stocks might continue to face difficulties in reviving their businesses.
Stocks to Buy:
Booking Holdings, Inc. (BKNG)
BKNG provides travel-related services through its online platform. The company has operations around the world. BKNG’s stock has gained 79% since hitting its low in mid-March.
The company has recently launched a new loyalty program called Priceline VIP to help frequent travelers save more money on their travels. The company also provided a number of custom deals and discounts for travelers on Black Friday.
For the third quarter ended September 2020, the company reported results that were better than expected despite significant challenges posed by the pandemic. The company’s revenue declined 47% while there was a 43% decline in bookings. However, the company remains poised to see a turnaround once the travel industry rebounds.
BKNG is estimated to see a revenue growth of 52.3% in 2021. The company’s EPS is expected to rise 3125% in 2021 and at a rate of 2.1% per annum over the next five years.
How does BKNG stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
A for Peer Grade
A for Industry Rank
A for Overall POWR Rating
The stock is also ranked #3 out of 59 stocks in the Internet industry.
Expedia Group, Inc. (EXPE)
EXPE is an online travel agency that operates in the United States and internationally. The company helps users book tickets for travel, hotel accommodation, rental cars, and provides other travel related services. The company’s stock has gained 13.9% so far this year.
EXPE is working toward revamping its backend technology to improve their service offerings. The company is also going to use artificial intelligence and data analysis to provide better targeting of their services. The company has recently laid off employees to make their organization more cost-effective and efficient.
For the quarter ended September 30th, the company saw a fall in revenue of 58% compared to the same period last year. The company’s bookings also fell 68% during the same period. However, the company has started work on revamping their Brand Expedia, Hotwire, and Vrbo iOS apps to meet future consumer demand. The company is investing in its long-term strategy to be a market leader in the online travel agency space.
EXPE is estimated to see a revenue growth of 45.5% in 2021. The company’s EPS is expected to rise 14.8% during the quarter ended March 2021 and 108.1% in 2021.
It’s no surprise that EXPE is rated a “Strong Buy” in our POWR Ratings system, with a grade of “A” in Trade Grade, Buy & Hold Grade, and Industry Rank. In the 59-stock Internet industry, it is ranked #11.
Stocks to Avoid:
Carnival Corporation (CCL)
CCL offers cruise services internationally. The company operates under the brand names of Holland America Line, Carnival Cruise Lines, Costa Cruises, Cunard, AIDA Cruises, and more. CCL’s stock has fallen 59.3% so far this year.
The cruise industry has been especially hard hit due to the pandemic, and CCL is one of them. Most of the company’s cruise services are on hold at the moment due to travel restrictions. The company expected to resume operations from December 1st, however, this may be delayed further.
For the quarter ended September 2020, CCL reported a net loss of $1.7 billion. The company has removed 18 ships which were less efficient from its fleet, which represents 12% of the company’s total capacity.
CCL is estimated to see a fall in revenue of 91.6% for the quarter ended February 2021. The company’s EPS is expected to decrease 266.6% during 2020 and 37.7% per annum over the next five years.
CCL’s POWR Ratings are consistent with this bleak outlook. It has an overall rating of “Sell” with a “F” for Buy & Hold Grade. It is ranked #3 out of 5 stocks in the Travel – Cruises industry.
American Airlines Group, Inc. (AAL)
AAL is a holding company that owns American Airlines and US Airways. AAL runs a total of approximately 6,700 flights every day to destinations in around 50 countries. AAL’s stock has fallen 47.9% so far this year.
The sharp drop in demand for air-travel has significantly hurt the company. The company has been operating at a loss in each of the trailing three quarters this year. During the same time, there has been a 64.2% drop in passenger revenues. The company also has high debt and its debt to total capital ratio stands at 1.2.
For the quarter ended September 2020, the company reported a fall in revenue of 73% compared to the same period last year. The company faced a net loss of $2.4 billion during the same period.
AAL is estimated to see a fall in revenue of 40.6% for the quarter ended March 2021. The company’s EPS is expected to decrease 510.2% in 2020 and 38.5% per annum over the next five years.
AAL’s poor prospects are also apparent in its POWR Ratings which assigned it a “Sell” rating. It has a “F” for Buy & Hold Grade. It is ranked #17 out of 22 stocks in the Airlines industry.
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BKNG shares were trading at $2,052.67 per share on Friday afternoon, down $11.13 (-0.54%). Year-to-date, BKNG has declined -0.05%, versus a 14.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Aaryaman Aashind
Aaryaman is an accomplished journalist that’s passionate about providing in-depth insights about investing and personal finance. Recently he has been focused on the stock market and he specializes in evaluating high-growth stocks. More…
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