It was difficult for investors to justify buying travel stocks in 2020 thanks to the fact that their businesses had to bear the brunt of the disruptions caused by the pandemic. With that said, things are changing quickly for their prospects thanks to the widespread distribution of vaccines. While many of these travel-related companies still face an uphill battle and uncertainty related to when travel volumes will return to pre-pandemic levels, there are plenty of reasons to consider adding shares of the best companies in the industry.
With good news seemingly hitting the wire daily and the possibility that pent-up travel demand will help volumes return to normal sooner rather than later, things are looking up for travel companies at this time. Most recently, we learned that the CDC issued new guidelines that suggest it is safe for fully vaccinated people to gather indoors with each other without wearing masks. These are the types of headlines that inspire confidence in travelers and could be a sign of good things to come for the beaten-down industry. Let’s take a look at 3 travel stocks that are set to surge in March.
First up is Expedia, one of the world’s largest online travel services companies that includes well-known businesses such as Expedia, Hotels.com, and Hotwire. Travelers can book pretty much anything for their trip using Expedia’s convenient platform, including airline tickets, car rentals, hotel reservations, and destination services. With a pickup in leisure travel likely on the horizon, this is undoubtedly one of the best travel stocks to watch this month. There’s also the fact that the company has a leading share of the rapidly-growing online vacation rental market with its VRBO platform.
The stock has been holding up very well during the recent market volatility and hit new all-time highs this week along with gaining 30% in February. It’s worth noting that the company reported Q4 revenue that was down 67% year-over-year to $920 million and a Q4 loss of $2.64 per share, yet the stock has rallied since the earnings release. This tells us that investors are optimistic about the travel company’s recovery prospects for the remainder of the year. Another bright spot to mention about Expedia is that the company reported increased bookings in January, which could be a sign of good things to come in March and beyond.
It’s incredible to reflect on how much things can change over a year. Take for example Disney, a global entertainment company that was seemingly in dire straits at the onset of the pandemic. With its theme parks and theaters closed and cruise ships docked for the majority of the year, the company’s earnings and stock price took a major hit. Disney’s operating income dropped 45% year-over-year leading to a net loss of $2.8 billion in 2020. Despite those numbers, the stock has recovered from its March lows and broken out to new all-time highs this month largely thanks to the company’s extremely successful rollout of its Disney+ streaming platform.
The launch of Disney+ couldn’t have come at a better time, with people forced to stay at home during the pandemic, the platform’s growth accelerated at an astounding pace. The company has already reached its FY24 subscriber goals with the streaming platform and reported direct-to-consumer & international revenue growth of 81% in 2020. When Disney starts to see a recovery in parks, experiences, and products revenue as travel volumes start to pick up again, long-term investors could be rewarded handsomely. There are already positive signs coming from the House of Mouse, as the company recently announced that Disneyland can reopen in California on April 1st. Keep an eye out for catalysts such as more theme park reopenings, an increase in bookings, and more direct-to-consumer rollouts that could boost the share price higher in March.
The simple logic behind buying travel stocks at this time is as follows - as more and more people get vaccinated, the general public’s overall comfort level about traveling will improve. This should eventually lead to more people hitting the road and using rideshare services such as Uber. Since the company is already positioned as a market leader in the ridesharing industry, investors should expect a sharp rebound in earnings at some point this year. Many travelers rely on Uber in foreign locales over taxis, and you also have to like the potential for a rebound domestically.
Regardless of how long it takes for the company’s ridesharing business to recover to pre-pandemic levels, investors should be reassured about the strength in Uber’s delivery service. In 2020, gross delivery bookings grew by 130% year-over-year and delivery revenue increased by 224% year-over-year to reach $1.3 billion. That side of the business should also benefit from recent acquisitions like alcohol delivery business Drizly and Postmates. With a strong balance sheet including $6.8 billion in cash and COVID-19 cases rapidly declining, Uber is a strong option in travel stocks to watch this month.
Before you consider Walt Disney, you'll want to hear this.
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