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6 Travel Stocks That Present a Buy and Hold Opportunity in 2020

6 Travel Stocks That Present a Buy and Hold OpportunityPosted on Thursday, April 16th, 2020 by MarketBeat Staff

There is a common expression that patience is a virtue. Many investors will have their patience tested in the coming weeks and months. Many stocks are dead in the water right now. Before we know how robust an economic turnaround will be, the nation has to get to the other side of the coronavirus.

The problem is that nobody knows exactly when that will be. And one reason for that is that recovery is going to be a state-by-state, household-by-household decision. Plus, it’s hard to determine what “normal” will be like without an actual vaccine.

Having said that, it’s more likely than not that the economy will reopen sooner rather than later. We may be wearing masks, foregoing handshakes and hugs, and otherwise socially distancing while getting back to a routine. And that includes traveling.

Some of the most beaten-down stocks are from the travel industry. Entire sectors of our economy including airlines, hotels, and casinos are facing multiple quarters of extremely low revenue.

But at some point, there will be a vaccine and life will go on. And when it does, some oversold travel stocks will come roaring back. In this presentation, we look at six travel stocks that you can buy and hold.

#1 - Booking Holdings (NASDAQ:BKNG)

Booking logo

One of the arguments against buying shares of Booking Holdings (NASDAQ:BKNG) is that the stock may not be as much of a bargain since it only fell about 35% at its low point. However, a better argument may be that Booking only had about $1.6 billion of prepaid bookings prior to the pandemic. That was significantly less than peers such as Expedia (NASDAQ:EXPE) and Airbnb. Less prepaid bookings means less money to refund to consumers.

 There is some speculation that a prolonged travel slump may make it more difficult for Booking to meet some 2021 debt obligations. However, forecasting what the economy may be like 18 months from now is a fool’s errand. In the short term, Booking looks has a strong cash position. At the end of 2019, the company had $7.3 billion in cash and marketable securities. And unlike other travel companies, Booking is not facing the issue of airplanes that are sitting idle or entire hotels sitting empty.

According to SunTrust Robinson Humphrey analyst Naved Khan, Booking’s low fixed-cost model and recent cost-cutting initiatives could allow the company to survive an entire year with no revenue. It certainly should allow the company the ability to run at zero cash burn if revenue drops 50% to 60%. 

And Booking also represents some light at the end of the tunnel for other reasons. The company’s CEO, Glenn Fogel was diagnosed with Covid-19, the disease caused by the coronavirus, in late March. However, Fogel was asymptomatic and appears to have recovered and was able to carry on with his duties while in the 14-day window of the virus progression.

About Booking
Booking Holdings Inc, formerly The Priceline Group Inc., is a provider of travel and restaurant online reservation and related services. The Company, through its online travel companies (OTCs), connects consumers wishing to make travel reservations with providers of travel services across the world. It offers consumers an array of accommodation reservations (including hotels, bed and breakfasts, hostels, apartments, vacation rentals and other properties) through its Booking.com, priceline.com and agoda.com brands. Its other brands include KAYAK, Rentalcars.com and OpenTable, Inc. (OpenTable). As of December 31, 2016, Booking.com offered accommodation reservation services for over 1,115,000 properties in over 220 countries and territories on its various Websites and in over 40 languages, which included over 568,000 vacation rental properties (updated property counts were available on the Booking.com Website).

Current Price: $1,812.64
Consensus Rating: Hold
Ratings Breakdown: 12 Buy Ratings, 16 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $1,723.54 (-4.9% Upside)



#2 - Marriott (NASDAQ:MAR)

Marriott International logo

It was going to be a brutal earnings season. But it really hurts when you have to be one of the first companies to report. Marriott (NASDAQ:MAR) was one of those companies and the preliminary numbers it provided for the first quarter were gruesome. The “highlights” such as they were are a 23% drop in revenue per available room (RevPAR) with a 60% drop in RevPAR just in the month of March.

Marriott stock initially rose on a forecast that, while grim, seemed to be in-line and perhaps even less bad than expected. But the stock has since struggled to hold those gains and is still sitting on a 40% loss in 2020. In the last two weeks, five analysts have offered opinions on MAR stock. Although only one of those analysts gave the stock a positive report (raising their price target), the consensus price target among those five analysts has the stock around $86 per share.

Of particular interest to prospective investors is the company’s dividend. Marriott has increased its dividend every year for the last 9 years. The company did issue a quarterly dividend on March 31, 2020. The company’s next dividend is scheduled for May.

Like many travel stocks investors will be watching closely to see if Marriott suspends its dividend. However, the company pays out only 32% of its earnings as a dividend so a cut in the dividend may be more likely than an outright suspension of the dividend.

The hotel chain still has 25% of its 7,300 properties closed due to the novel coronavirus pandemic.

About Marriott International
Marriott International, Inc. operates, franchises, and licenses hotel, residential, and timeshare properties worldwide. The company operates through North American Full-Service, North American Limited-Service, and Asia Pacific segments. It operates its properties under the JW Marriott, The Ritz-Carlton, Ritz-Carlton Reserve, W Hotels, The Luxury Collection, St. Regis, EDITION, Bulgari, Marriott Hotels, Sheraton, Delta Hotels, Marriott Executive Apartments, Marriott Vacation Club, Westin, Renaissance, Le Méridien, Autograph Collection, Gaylord Hotels, Tribute Portfolio, Design Hotels, Courtyard, Residence Inn, Fairfield by Marriott, SpringHill Suites, Four Points, TownePlace Suites, Aloft, AC Hotels by Marriott, Protea Hotels, Element, and Moxy brand names. As of April 10, 2019, it operated approximately 7,000 properties under 30 hotel brands in 130 countries and territories. Marriott International, Inc. was founded in 1927 and is headquartered in Bethesda, Maryland.

Current Price: $107.96
Consensus Rating: Hold
Ratings Breakdown: 4 Buy Ratings, 17 Hold Ratings, 1 Sell Ratings.
Consensus Price Target: $107.70 (-0.2% Upside)



#3 - Hilton International (NYSE:HLT)

Hilton Hotels logo

If you’re looking for travel stocks to buy at the moment, you can do worse than look at the companies that had strong balance sheets prior to the pandemic. Well-run companies tend to bounce back better when hit with adversity. And that’s a solid argument for Hilton International (NYSE:HLT).

This was a thought echoed by Gina Sanchez, CEO of Chantico Global, who gave an interview  in late March in which she commended the company for its strong balance sheet. One reason for Sanchez’s optimism is the belief in two things.

First, that there the United States is indeed seeing the peak of the novel coronavirus cases in mid-April as forecast. And second, that as the economy begins to reopen, business travel will rebound faster than recreational travel. As Sanchez noted, “I think that you’re going to see a lot of pent-up plans that need to happen at some point soon.”

This idea of “betting on the country” was also expressed by hedge fund manager, Bill Ackman, who expressed, “If you can buy Hilton at $60 when it was trading at $120, it’s going to be a bargain.”

After hitting a low around $55, a stock price that chopped off nearly half of the stock’s opening price in 2020, HLT stock is starting to recover. Part of the reason for that is because investors approve of the company’s plans to cut “non-essential” costs. These measures included suspending its share buyback program and its dividend payouts. Additionally, CEO Christopher Nassetta will not take any salary for the remainder of 2020 and the executive committee will take 50% pay cuts across the board until the pandemic abates.

Stock #6 is giving investors a great entry point



About Hilton Hotels
Hilton Worldwide Holdings Inc., a hospitality company, owns, leases, manages, develops, and franchises hotels and resorts. It operates through two segments, Management and Franchise, and Ownership. The company engages in the hotel management and licensing of its brands to franchisees. It operates hotels under the Waldorf Astoria Hotels & Resorts, LXR Hotels & Resorts, Conrad Hotels & Resorts, Canopy by Hilton, Hilton Hotels & Resorts, Curio Collection by Hilton, DoubleTree by Hilton, Tapestry Collection by Hilton, Embassy Suites by Hilton, Motto by Hilton, Hilton Garden Inn, Hampton by Hilton, Tru by Hilton, Homewood Suites by Hilton, Home2 Suites by Hilton, Hilton Grand Vacations, and Signia Hilton brands. It operates in North America, South America, and Central America, including various Caribbean nations; Europe, the Middle East, and Africa; and the Asia Pacific. As of March 29, 2019, the company had approximately 5,600 properties with approximately 913,000 rooms in 113 countries and territories. Hilton Worldwide Holdings Inc. was founded in 1919 and is headquartered in McLean, Virginia.

Current Price: $86.34
Consensus Rating: Hold
Ratings Breakdown: 4 Buy Ratings, 12 Hold Ratings, 1 Sell Ratings.
Consensus Price Target: $80.57 (-6.7% Upside)



#4 - Southwest Airlines (NYSE:LUV)

Southwest Airlines logo

When the economy began to go into lockdown back in March, Southwest Airlines (NYSE:LUV) was trying to find a bottom. At the time, the CARES program was taking shape and it appeared that the airlines were in line to receive some of the government’s stimulus.

However, that didn’t happen as quickly as first anticipated. In fact, as more information was released and it appeared that any stimulus funds the airlines received might come with odious strings attached, the stock continued to decline.

But news that Southwest is one of approximately ten carriers to reach an agreement with the government sets the company to receive $3.2 billion in direct support as well as a $1 billion loan. In return, Southwest along with the other carriers will issue warrants to the government for a portion of its total equity. The company also had to pledge to not layoff any of its workforce prior to September 30.

Reading the tea leaves, it’s likely that the government is intending to have the economy up and running before the fall. Of course, like many things surrounding this virus there is no guarantee that will happen. And even if it does, it’s impossible to predict consumer sentiment. And more importantly, with the economy assuredly heading for a recession of some severity, will consumers be able to afford a flight no matter how discounted the fare is.

Either way, the injection of capital gives Southwest a longer runway. And considering that it was in a better position than some airlines prior to the pandemic, which should count for something.

About Southwest Airlines
Southwest Airlines Co. operates a passenger airline that provides scheduled air transportation services in the United States and near-international markets. As of December 31, 2018, the company operated a total of 750 Boeing 737 aircraft; and served 99 destinations in 40 states, the District of Columbia, and the Commonwealth of Puerto Rico, as well as 10 near-international countries, including Mexico, Jamaica, the Bahamas, Aruba, the Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, and Turks and Caicos. It also offers inflight entertainment and connectivity service on Wi-Fi enabled aircraft; and sells points and related services to business partners participating in the Rapid Rewards loyalty program, such as car rental agencies, hotels, restaurants, and retailers. In addition, the company provides a suite of digital platforms to support customers' needs across the travel journey, including Southwest.com, mobile.southwest.com, an iOS app, and an android app; and Swabiz.com, a Website for business customers that offer businesses shared stored company credit cards, company activity reporting, and centralized traveler management services. Southwest Airlines Co. was founded in 1967 and is based in Dallas, Texas.

Current Price: $38.18
Consensus Rating: Buy
Ratings Breakdown: 12 Buy Ratings, 8 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $51.18 (34.0% Upside)



#5 - Spirit Airlines (NASDAQ:SAVE)

Spirit Airlines logo

If you’re interested in a stock that is more “under the radar”, Spirit Airlines (NASDAQ:SAVE) may be a savvy alternative. The argument against SAVE stock is that it tends to be volatile and the company has a debt-to-asset ratio of 35% which is high even for the airline industry. And the ratio has increased by over 30% in the last year. It seems Spirit was aggressively trying to expand its fleet and now is watching the investment sit idle.

On April 9, the company got some more bad news as analysts delivered a highly pessimistic outlook for 2020 earnings. But the stock has largely traded sideways since that announcement which suggests that maybe the company’s stock has reached a bottom. After all, to single out any airline as a threat to miss on earnings in this current environment is unrealistic. It’s going to be a terrible year for every airline. Period.

That’s the bad news. The good news is that Spirit, unlike the major carriers, is very familiar with how to compete with rock-bottom airfare. And customers know what they’re getting with Spirit. That won’t change so there’s less of a chance to disappoint. And, Spirit has virtually no international exposure (the company offers flights to just a handful of Latin American countries). That’s significant because while domestic travel may come back soon, international travel will probably be restricted for some time.

Although not listed initially, it does appear that Spirit will be receiving some of the $25 billion in government stimulus. And with the company reporting positive free cash flow in 2019 (the first time the company had pulled that off in six years), things are looking good.

About Spirit Airlines
Spirit Airlines, Inc. provides low-fare airline services. The company operates approximately 600 daily flights to 77 destinations in the United States, the Caribbean, and Latin America. As of December 31, 2019, the company had a fleet of 145 Airbus single-aisle aircraft comprising 31 A319ceos, 64 A320ceos, 20 A320neos and 30 A321ceos. It offers tickets through its call centers and airport ticket counters, as well as online through spirit.com; and through various third parties, including online, traditional travel agents, and electronic global distribution systems. The company was formerly known as Clippert Trucking Company and changed its name to Spirit Airlines, Inc. in 1992. Spirit Airlines, Inc. was founded in 1964 and is headquartered in Miramar, Florida.

Current Price: $22.62
Consensus Rating: Hold
Ratings Breakdown: 7 Buy Ratings, 8 Hold Ratings, 3 Sell Ratings.
Consensus Price Target: $33.00 (45.9% Upside)



#6 - Eldorado Resorts (NASDAQ:ERI)

Eldorado Resorts logo

With their crowded gaming floors and high-touch surfaces, casinos would seem to be one of the least likely bets among travel stocks. But it’s a bet you should be willing to take with Eldorado Resorts (NASDAQ:ERI).

Prior to the outbreak of the novel coronavirus, Eldorado was in the process of buying out Caesars Entertainment Corporation. This is significant because Caesars is the “official casino partner” of the National Football League (NFL). And if I had to make one bet on the future of live sports in the United States, it is that the NFL will be playing football in the fall.

In addition to its affiliation with the NFL, Caesars is also the official supplier of betting odds for both ESPN and Turner Sports. And when the buyout is complete, ERI will have access to a network of sports books that is spread out among 29 casinos in nine states.

This is a presentation about stocks for you to buy and hold. And patience will be required if you’re going to own ERI stock. But with the stock trading at nearly 25% of the price it was at to start the year, the stock appears to be giving investors a great entry point. Even if the casino industry takes a while to come back, the company should get a nice lift from the sports book side of things.

About Eldorado Resorts
Eldorado Resorts, Inc. operates as a gaming and hospitality company in the United States. It owns and operates Eldorado Resort Casino Reno, a hotel, casino, and entertainment facility; Silver Legacy Resort Casino, a themed hotel and casino; Circus Circus Reno, a hotel-casino and entertainment complex; Eldorado Resort Casino Shreveport, a hotel and tri-level riverboat dockside casino; Mountaineer Casino, Racetrack & Resort, a hotel, casino, entertainment, and live thoroughbred horse racing facility; Presque Isle Downs & Casino, a casino and live thoroughbred horse racing facility; and Eldorado Gaming Scioto Downs, a modern racino. The company also operates Isle Casino Hotel—Black Hawk and Lady Luck Casino—Black Hawk land-based casinos; Isle Casino Racing Pompano Park, a casino and harness racing track; Isle Casino Bettendorf, a land-based single-level casino; Isle Casino Waterloo, a single-level land-based casino; Isle of Capri Casino Hotel Lake Charles, a gaming vessel; Isle of Capri Casino Lula, a two dockside casino; Lady Luck Casino Vicksburg and Isle of Capri Casino Kansas City dockside casinos; Isle of Capri Casino Boonville, a single-level dockside casino; Isle Casino Cape Girardeau, a dockside casino, and pavilion and entertainment center; Lady Luck Casino Caruthersville, a riverboat casino; and Lady Luck Casino Nemacolin, a casino property. In addition, it operates Tropicana Casino and Resort, Atlantic City, a casino and resort; Tropicana Evansville, a casino hotel and entertainment complex; Lumière Place Casino, Tropicana Laughlin Hotel and Casino, MontBleu Casino Resort & Spa, and Grand Victoria Casino; Trop Casino Greenville, a landside gaming facility; Belle of Baton Rouge Casino & Hotel, a dockside riverboat; and Racelinebet.com. As of December 31, 2018, it owned 28 gaming facilities with approximately 30,000 slot machines and video lottery terminals; 800 table games; and 12,600 hotel rooms. The company was founded in 1973 and is based in Reno, Nevada.

Current Price: $43.77
Consensus Rating: Buy
Ratings Breakdown: 7 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $43.31 (-1.0% Upside)

 

It’s hard for many Americans to see it right now, but the global economy will recover. The travel sector may be one of the lagging indicators. And even within specific industries (hotels, airlines, etc.), some companies will recover faster than others.

Former Federal Reserve chairman Ben Bernanke likened the current crisis to a severe winter storm, or other natural disaster. Essentially, Bernanke is repeating what some other analysts have suggested. That is, while the economic destruction is harsh, the recovery may be equally as swift.

However, right now any recovery will “follow the science” and the science is conflicted on the matter. While it’s becoming more and more certain that the intense social distancing (i.e. mitigation) efforts taking place throughout the country have had some effect in “flattening the curve”, it won’t be “business as usual” until there is a vaccine for the novel coronavirus.

But somehow, someway, the economy is going to reopen. And when it does, the travel companies will be ready to greet travelers with open arms. And that will be good news for investors.

8 Stocks You Can Count On During Any Crisis

Depending on how you look at it, the economic outlook is getting cloudier or clearer.

The argument for a cloudy economy is easy to make. Multiple times of day we hear about more Americans testing positive for the novel coronavirus. The worldwide number of positive tests exceeds one million. And unfortunately, it will go higher. We just don’t know by how much.

But there are two parts to this ongoing situation. The first is the real-time science experiment as the world attempts to flatten the curve. The other is the very real economic impact. And the numbers of the economic carnage are coming in faster than any significant evidence of a flattening curve.

The number of unemployed now exceeds six million and will only rise. The government is throwing everything including the kitchen sink at the problem. But it’s an experiment in real-time. We won’t know the results for some time.

But even while we wait for a new normal to return, there are ways for you to profit. There are companies that are keeping our economy going now, and have a business model that sets them up well for success after the pandemic is over.

View the "8 Stocks You Can Count On During Any Crisis" Here.






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