The United States is slowly returning to a semblance of normalcy. It won’t be long until the pale, isolated and depressed masses emerge from their dwellings, fly from coast to coast, embark on cross-country road trips and roll the dice in Vegas.
Though people will likely hesitate to book a lengthy cruise due to their widespread negative publicity as the pandemic played out, car rental companies, hotels, airlines and travel booking websites are sure to benefit from the reopening.
Let’s take a look at whether Marriott International (MAR), Expedia Group (EXPE) and Avis Budget Group (CAR) could emerge as winners.
Marriott International (MAR)
Regardless of the method of transportation people take to their summer and fall destinations, they will need a place to stay. The widely-revered MAR hotels are sure to enjoy a significant uptick in business as travel resumes.
This global leader in hospitality services is primarily focused on lodging and franchising. Though few know it, MAR owns the Ritz-Carlton hotels and is also in the timeshare property business. All in all, MAR conducts business in 134 countries under a whopping 30 DBA names.
The POWR Ratings have MAR ranked fourth of 14 stocks in the Travel – Hotels/Resorts category. MAR POWR Rating Components are formidable across the board. In terms of price returns, MAR is in the green across the board but for its six-month and one-year returns. The company’s five-year price return is in excess of 40%.
MAR quarterly revenue came in higher than the consensus estimate, giving investors plenty of reason for hope. Every investor looking to capitalize on the return to normal should give serious consideration to establishing a position in MAR.
Expedia Group (EXPE)
Search for airfare, a hotel, cruise or a rental car and you are likely to find your way to EXPE. EXPE provides travel services and products to the public. As one of the world’s largest online travel businesses, EXPE connects consumers with travel-related service providers for leisure and business trips.
In the context of the POWR Ratings, EXPE has an A Industry Rank along with a solid Trade Grade and a three-month price return of 34.33%.
Currently, trading at $87, EXPE is $57 away from its 52-week high. Though EXPE fell to $48 amidst the market-wide sell-off, the stock has steadily climbed back to its pre-covid trading level of $120. In fact, the stock jumped 12% in the month of May.
EXPE’s reduced expense profile combined with a cash infusion through new loans will offset its billion dollar cash burn in the prior quarter. The average analyst price target for the stock is slightly higher than $90, meaning there is still some upside to go as EXPE rebounds to a more reasonable trading level.
Avis Budget Group (CAR)
Take a moment to consider the perspective of someone who has been quarantined for months, has discretionary income and desires to travel while the weather is tolerable. Such an individual is unlikely to book a cruise simply because cruise ships are disproportionately vulnerable to coronavirus outbreaks. Furthermore, planes are basically large germ tubes that require close proximity to others who might carry the virus.
The most prudent approach to travel in the aftermath of the coronavirus pandemic is to rent an automobile and see the country at ground level. This means CAR should enjoy a spike in reservations in the final two quarters of the year. CAR provides both car and truck rentals for everyday people as well as businesses.
CAR operates in the United States along with 174 other nations, making it a fairly safe play. After all, there is a good chance COVID-19 force a return to quarantine in one or several countries so it is better to have car rental locations scattered across the globe rather than consolidated in one area on the map.
In terms of the POWR Ratings Components, CAR has a solid Trade Grade and Industry. The stock has a three-year price return in excess of 25%. CAR has nearly $300 million in free cash flow along with impressive efficiency and expense ratios so the company probably won’t go bankrupt. Though CAR is currently priced at about half of its 52-week high, it should move upward as the economy returns to a semblance of normalcy.
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MAR shares were unchanged in after-hours trading Friday. Year-to-date, MAR has declined -38.83%, versus a -4.93% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More…
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