The last 18 months have created much uncertainty in the market. And it has been a catalyst for the gamification of stock trading. However, there was one prediction that looked like a good bet then and does even more so now. That prediction was that Americans would begin to travel en masse as soon as they possibly could.
While America may not be back to a pre-pandemic normal, it’s much closer than it was just six months ago. And Americans are making investors in travel stocks very happy.
But is this a case of the easy gains being gone? Should investors be concerned about the Delta variant of the novel coronavirus that is causing public health restrictions to be enacted in certain areas of the world?
At this point, neither of those statements seems to be true. That’s why we’ve put together this special presentation that focuses on travel stocks. We’ve looked at different sectors of the travel category and selected a sample of companies whose stocks look like good investments for the rest of 2021 and likely beyond.
Quick Links
- Southwest Airlines
- Expedia
- Airbnb
- Boyd Gaming
- Six Flags
- Ryman Hospitality Properties
- Invesco Dynamic Leisure & Entertainment ETF
#1 - Southwest Airlines (NYSE:LUV)
The first stock on our list of travel stocks to buy now is Southwest Airlines (NYSE: LUV). When the pandemic was first shutting down travel throughout the world, I forecast that Southwest would be one of the stronger airline stocks coming out of the pandemic.
Southwest’s strong balance sheet (the company has approximately $15 billion in liquidity) has allowed it to add routes – it has 18 new routes since prior to the pandemic. And that leads to another reason why I like LUV stock. To take a slogan from real estate, it’s about location, location, location. With small exclusions, the airline flies exclusively in the United States. This is critical because it appears that international travel is likely to remain suppressed.
And the airline has always been known as a budget-friendly airline which will still be important even as consumers are flush with stimulus cash.
LUV stock has experienced a sharp sell-off in June, but that should just make it an even more attractive buy for investors who are looking to find value and growth in the travel sector.
About Southwest Airlines
Southwest Airlines Co operates as a passenger airline company that provides scheduled air transportation services in the United States and near-international markets. As of December 31, 2023, the company operated a total fleet of 817 Boeing 737 aircraft; and served 121 destinations in 42 states, the District of Columbia, and the Commonwealth of Puerto Rico, as well as ten near-international countries, including Mexico, Jamaica, the Bahamas, Aruba, the Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, and Turks and Caicos.
Read More - Current Price
- $33.28
- Consensus Rating
- Reduce
- Ratings Breakdown
- 3 Buy Ratings, 11 Hold Ratings, 4 Sell Ratings.
- Consensus Price Target
- $31.37 (5.7% Downside)
#2 - Expedia (NASDAQ:EXPE)
If you’ve done any television viewing (streaming or otherwise), then you know the battle of online travel companies is in full swing. Two of the top publicly traded news are Expedia (NASDAQ: EXPE) and Booking Holdings (NASDAQ: BKNG). For now, I’m giving the nod to EXPE stock, and here’s why.
To steal from what I just wrote about LUV stock, it’s all about the location. Expedia generates the majority of its business in the United States. For Booking Holdings that comes primarily from Europe. Prior to the pandemic, this was widely seen as an advantage for BKNG stock. But, for now, the tables have turned. This should allow Expedia to close what has been a large gap in profit margin between the two firms.
By the looks of it, the institutional investors are coming to a similar conclusion. A record number of hedge funds have taken bullish positions on EXPE stock. At the end of the first quarter, the stock was in 86 hedge fund portfolios; the previous high was 76.
About Expedia Group
Expedia Group, Inc operates as an online travel company in the United States and internationally. The company operates through B2C, B2B, and trivago segments. Its B2C segment includes Brand Expedia, a full-service online travel brand offers various travel products and services; Hotels.com for lodging accommodations; Vrbo, an online marketplace for the alternative accommodations; Orbitz, Travelocity, Wotif Group, ebookers, CheapTickets, Hotwire.com and CarRentals.com.
Read More - Current Price
- $184.75
- Consensus Rating
- Hold
- Ratings Breakdown
- 10 Buy Ratings, 20 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $169.70 (8.1% Downside)
#3 - Airbnb (NASDAQ:ABNB)
Airbnb (NASDAQ: ABNB) had one of the most anticipated IPOs of 2020. But if you didn’t get in early, you may be looking at a slight loss. ABNB stock has been selling off since February and is down nearly 30% from that price. However, it’s been rallying in the past month and looks ready to deliver on its promise.
One reason for this is that as investors begin to put the pandemic behind them, they’re focusing on future earnings and revenue growth. Both of those metrics look to be solid reasons to buy ABNB stock. Analysts give the stock a consensus hold rating with a price target that suggests an upside of over 8%. However, Loop Capital recently boosted its price target to over $240.
Airbnb is hoping that its unique business model that offers consumers a wider selection of more intriguing properties will help it stand out as Americans get back to traveling.
About Airbnb
Airbnb, Inc, together with its subsidiaries, operates a platform that enables hosts to offer stays and experiences to guests worldwide. The company's marketplace connects hosts and guests online or through mobile devices to book spaces and experiences. It primarily offers private rooms, primary homes, and vacation homes.
Read More - Current Price
- $134.21
- Consensus Rating
- Hold
- Ratings Breakdown
- 8 Buy Ratings, 19 Hold Ratings, 6 Sell Ratings.
- Consensus Price Target
- $139.48 (3.9% Upside)
#4 - Boyd Gaming (NYSE:BYD)
Las Vegas is likely to be a popular destination in 2021. In early January, the research firm Heart + Mind conducted a survey in which 74% of respondents felt Las Vegas was the city best prepared to safely host in-person events in the second half of 2021. This included business travel which is not recovering as strongly as recreational travel.
But even if that doesn’t come to pass, the broader casino sector should enjoy some strong growth and that’s why I like Boyd Gaming (NYSE: BYD). The company’s portfolio of gaming properties spans 10 states which gives Boyd many opportunities to capture consumer dollars.
By many measures, BYD stock looks to be a bit overvalued after a run-up of over 190% in the last 12 months. And technical analysis suggests there may be better options at the moment. However, the fundamentals of Boyd look strong and the likelihood of higher revenue will add to the stock’s appeal.
The consensus price target of 13 analysts points to BYD stock going lower. However, the most recent price targets which came in after Boyd reported earnings in April are significantly higher. And the stock does not carry any sell ratings.
About Boyd Gaming
Boyd Gaming Corporation, together with its subsidiaries, operates as a multi-jurisdictional gaming company in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio, and Pennsylvania. The company operates through Las Vegas Locals, Downtown Las Vegas, Midwest & South, and Online segments.
Read More - Current Price
- $71.20
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 8 Buy Ratings, 6 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $91.64 (28.7% Upside)
#5 - Six Flags (NYSE:SIX)
Another destination travel stock that makes the list is Six Flags (NYSE: SIX). SIX stock has rocketed up 123% in the 12 months ending June 30, 2021. And that still leaves the stock 13.5% below the level it was at this point in 2019.
With the company’s amusement parks likely to be open at nearly pre-pandemic levels, 2021 should see the company’s revenues growing. In fact, the company’s revenue is expected to grow by an average of over 45% in the next five years.
Another thing to like about SIX stock is that the company was able to renegotiate some of its leverage covenants during the pandemic so the company has a little breathing room as it gets up and running.
In late February, I advised investors to sit tight until they saw revenue numbers for the quarter ending in June. The stock quickly soared to its 52-week high, but has since pulled back and now is selling for approximately what is was when I made my last call.
With the stock consolidating, now may be a good time to pick up shares as a good earnings report in August will likely be a catalyst for further stock price growth.
About Six Flags Entertainment
Six Flags Entertainment Corporation owns and operates regional theme and waterparks under the Six Flags name. Its parks offer various thrill rides, water attractions, themed areas, concerts and shows, restaurants, game venues, and retail outlets. The company sells food, beverages, merchandise, and other products and services within its parks.
Read More - Current Price
- $32.00
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 2 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $28.00 (12.5% Downside)
#6 - Ryman Hospitality Properties (NYSE:RHP)
If you’re familiar with Ryman Hospitality Properties (NYSE: RHP) then you may believe that I’m adding this to the list as a contrarian play. But the reality is a bit more complex and very interesting.
Ryman is a leading real estate investment trust (REIT) that specializes in the lodging and hospitality sectors. In fact, Ryman’s “core holdings” include five of the top 10 largest non-gaming convention center hotels in the United States. Some are still shut. Overall occupancy rates are hovering around 16%. So why the bullish outlook?
Part of it comes from this little nugget. The company has stated that 2022 bookings are higher than 2019. Can you say pent-up demand for business travel? The rubber chicken circuit has never looked better.
And Ryman has used the pandemic as an opportunity to raise capital so it could reinvest in its business which has improved the company’s liquidity.
Still, this is not a stock for the faint-hearted. The company suspended its dividend at the onset of the pandemic and still has not reinstated it. But sitting about 10% below its 52-week high and about 15% below pre-pandemic levels, RHP stock may reward risk-tolerant investors with at least a 12-month timeline.
About Ryman Hospitality Properties
Ryman Hospitality Properties, Inc (NYSE: RHP) is a leading lodging and hospitality real estate investment trust that specializes in upscale convention center resorts and entertainment experiences. The Company's holdings include Gaylord Opryland Resort & Convention Center; Gaylord Palms Resort & Convention Center; Gaylord Texan Resort & Convention Center; Gaylord National Resort & Convention Center; and Gaylord Rockies Resort & Convention Center, five of the top seven largest non-gaming convention center hotels in the United States based on total indoor meeting space.
Read More - Current Price
- $105.80
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 6 Buy Ratings, 0 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $128.57 (21.5% Upside)
#7 - Invesco Dynamic Leisure & Entertainment ETF (NYSEARCA:PEJ)
If choosing individual travel stocks still feels too risky for you, the last option on my list is the Invesco Dynamic Leisure & Entertainment ETF (NYSEARCA: PEJ). The fund has outperformed the broader U.S. market and also the consumer discretionary sector in 2021. The fund did benefit from the surge in AMC Entertainment (NYSE: AMC). However, the fund divested its position at the end of the quarter and that is leading some analysts to wonder if the stock will fall back to its past performance. In the prior three years, PEJ has had a return of 4.7% which has made it a considerable laggard.
The fund is trading at the upper end of its 52-week range which suggests investors should be cautious about entering a position. Still with 90% of the fund’s holdings focused on common stocks in the hospitality industry, it’s an ideal way for investors to gain exposure to this sector which is likely to be one of the strongest for the remainder of 2021 and beyond.
About Invesco Leisure and Entertainment ETF
PowerShares Dynamic Leisure and Entertainment Portfolio (the Fund) seeks investment results that correspond generally to the price and yield of the Dynamic Leisure and Entertainment Intellidex Index (the Index). The Index is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including fundamental growth, stock valuation, investment timeliness and risk factors.
Read More - Current Price
- $52.41
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 5 Buy Ratings, 8 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $52.41 (0.0% Downside)
As I stated in the introduction, it’s typically not a bad investing strategy to bet on the American consumer. After a long 16 months, millions of Americans are either vaccinated or have natural immunity from having had the virus. I’ll leave the debate about herd immunity to other people. Right now, Americans are ready to travel.
It’s unclear whether the fall or winter will bring more Covid-related concerns. However, for now, the existing vaccines look effective against the variants. And this fall will make it nearly a full year since the vaccines were available. Perhaps that will spawn a resurgence with some individuals who are on the fence.
But in the here and now, this reopening will create many opportunities for investors. And despite many of these stocks having an impressive run, part of that is because they were deeply discounted at the onset of the pandemic.
Obviously, this isn’t an exhaustive list of travel stocks to buy for the rest of 2021. But they give you a representation of strong performers across many of the most popular sectors.
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