The coronavirus pandemic absolutely decimated the travel sector. For more than one year — and nearly two years in some cases — travel companies were at a complete standstill.
Although airlines were still flying, their load factors were so low that pilots were furloughed, ground staff was laid off and the number of flights was cut dramatically, all while losses piled up. Lodging companies and online travel agencies suffered equally as much, if not more. Cruise ships likely had the worst of it, with the CDC going so far as to issue a “no sail” order that caused vessels to drop anchor at various spots around the globe — with some even ending up on the scrap heap.
But as much as the travel sector had to endure for the bulk of the last two years, a recovery is in sight. The majority of Americans are now fully vaccinated, shutdown orders seem to be a thing of the past, and pent-up travelers are on the move. According to the U.S. Travel Association, domestic leisure travel has already surpassed pre-pandemic levels, and domestic business travel is expected to reach 96% of pre-pandemic levels by 2023.
What Are the Best Travel Stocks To Buy Right Now?
There are two sides to every coin, and while consumers and businesses alike are already plunking down their cash, certain barriers to profitability remain for travel companies. Many companies had to take on loads of additional debt to survive the pandemic, and others will take some time to ramp up their operations to the point that they can maximize earnings again.
In this type of environment, it pays to be diversified within the sector. With that in mind, here’s a look at five companies operating in different areas of the travel industry that all have consensus “buy” ratings from Wall Street analysts. Consult with your financial advisor to see which of these may fit in with your investment objectives and risk tolerance.
United Airlines (UAL)
If you’ve seen the news in 2022, particularly in the summer, you’ve seen how passengers are flocking back to airlines, with counts reaching nearly pre-pandemic levels. This will greatly help carriers like United Airlines that have robust domestic and international services.
Just bear in mind that there are still many risks for carriers like United. Although Europe has gotten the worst of it, airlines in general are reeling from lost luggage, understaffing and the ever-present risk of a returning coronavirus surge. Rising inflation and fuel costs are also not doing the airlines any favors. Yet if these problems prove to be temporary and passengers continue to fill the planes, airlines like United have the potential for a great recovery.
According to Nasdaq, the 19 analysts that follow the company have a consensus buy rating on the stock and an average 12-month price target of $47.67, about 30% above current levels.
Norwegian Cruise Line Holdings (NCLH)
Cruise lines in general are lucky to be afloat after all they’ve had to endure during the coronavirus pandemic. Unlike hotels and airlines, which could at least operate with limited capacity, all of the major cruise lines essentially had to stop operating for more than a full year. During that time, however, they still had numerous expenses, from docking to maintaining their vessels. As a result, Norwegian Cruise Line Holdings had to take on a massive $6.6 billion in additional debt just to survive.
However, things are looking up for the industry. On July 18, the CDC announced it would no longer report coronavirus levels on cruise ships, opening the door for cruise lines to stop pre-cruise testing and removing some of the negative press that had been hounding the industry since sailings resumed. Just like with the airlines, it will take some time before the cruise lines can sort out their staffing issues and ship logistics to get everything up and running 100%, but they seem to be on the path to doing so.
Ten analysts covering Norwegian Cruise Line Holdings have a consensus buy rating on it, with an average 12-month price target of $19.73. That would mark a whopping 63% gain over current levels.
Booking Holdings (BKNG)
Online travel agencies like Booking Holdings suffered tremendously during the pandemic, as there were few things that customers were able to book. But if you’re at all a believer in the global rebound of travel, Booking Holdings is a company you probably want to own. Booking Holdings doesn’t merely own its namesake property, Booking.com — which itself is the largest online travel agency in the world. Booking Holdings also owns Agoda, Priceline, OpenTable, Rentalcars.com and the travel search engine Kayak.
In other words, Booking Holdings owns a huge segment of the online booking world, and its revenues should soar the more that travel resumes its normal pattern. In its March 2022 earnings report, year-over-year revenue jumped more than 136%, potentially foretelling future revenue gains.
The consensus rating of 24 analysts covering Booking Holdings is a strong buy, and their average 12-month price target sits 35% above current levels, at $2,588 per share.
The lodging industry suffered mightily during the pandemic, and the carnage was widespread. Industry disruptor Airbnb started out with a bang, jumping 223% to an all-time high of $219.94 just two months after it went public in December 2020 at $68 per share. But the company was not immune to the perils of the pandemic, and even after a recent rally, shares sat at $108.84 as of July 28, 2022.
Yet the strengths that made Airbnb pop after its IPO remain in place. The company serves an immense and growing market, and unlike its traditional lodging competitors, it doesn’t have the massive expense of building, owning, acquiring and maintaining physical properties. Airbnb operates simply as a service portal, without having to carry physical properties on its balance sheet. This helps keep costs low and allows the company to remain nimble.
Analysts agree, with a bullish opinion on the future of Airbnb. The 12-month average price target of the 30 analysts following Airbnb is $157.15, with a consensus buy rating. With the stock at $108.84 as of July 28, analysts expect a 44% pop over the next year.
The Walt Disney Co. (DIS)
If you’re looking for an all-in-one stock when it comes to the entertainment and travel industries, Disney might be the ticket. The stock was pummeled mercilessly during the pandemic, as all three of its major industries — cruise lines, theme parks and filmed entertainment — all went into shutdown. But the company has been slow to recover, with its stock down 14.51% in 2021 and an additional 32.25% thus far in 2022. As such, the former growth stock is now a value play, but one poised to recover strongly.
In addition to its well-known library of American classic films, the company also owns both Marvel Studios and Lucasfilm. On the streaming front, beyond its flagship streaming service, Disney+, the company owns ESPN+, ABC, Lifetime, History, A&E, FX and Hulu. As Americans and indeed tourists around the world start consuming the company’s filmed and streaming content, return to theme parks and sail on its cruise line, earnings should jump.
“Strong buy” is the consensus rating on Disney stock from the 27 analysts following it, with an average one-year price target of $136.13. With shares trading at about $105 per share as of the end of July 2022, a potential 30% gain awaits investors 12 months down the road.
The Bottom Line
Travel is definitely on the rise, and there will no doubt be some big winners in the industry. However, picking the exact right travel stock can be a challenge, especially in light of the effects of the pandemic. Selecting the market leaders across a variety of travel subsectors could be a winning strategy. Just be sure to do your own research and find the stocks that are the best match for your overall portfolio.
Data is accurate as of July 28, 2022, and is subject to change. Information on analyst ratings was sourced from Nasdaq.
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- U.S. Travel Association. 2022. "Travel Forecast."
- Seeking Alpha. 2022. "Norwegian Cruise Stock: More Trouble On The Horizon."
- Seeking Alpha. 2022. "LRT Capital - Booking Holdings: Reaping Benefits Of An Enormous Network."
- Investor's Business Daily. 2022. "Airbnb Stock: Is It A Buy Or Sell? Here's What Fundamentals, ABNB Stock Chart Action Say."