It’s Time For Summer Vacations and Here Are Big Cap Stocks to Invest In Now.
Jul 10, 2023
The Fourth of July holiday was a record-breaking period for travel, slamming the concept that consumers are beginning to cut back on travel expenditures, and here is your chance to invest in big cap stocks from vacationing giants.
The Transportation Security Administration inspected more than 2.88 million passengers on Friday, June 30, breaking the previous record set on the Sunday after Thanksgiving in 2019. Over the weekend, travel records were shattered at airports around the country, according to the TSA.
Other evidence is less convincing: According to US inflation estimates, airfares fell for the second month in a row in May, while hotel demand has plummeted for three months in a row, according to the US Travel Association. However, such data primarily reflect local trends, masking increased foreign travel.
“Three summers where Americans vacation domestically, we observe that they are heading internationally this summer,” says Truist analyst Patrick Scholes.
The data backs up this claim. According to online travel operator Hopper, round-trip tickets to Europe from the United States are averaging $1,200, the most in more than five years. According to industry tracker STR, hotel room prices in London climbed by more than 20% in May.
The big cap stocks of overseas travel trends also could pay off nicely for investors.
According to Truist analysts, Hyatt Hotels (H) is their favorite hotel company, with about 30% of its earnings coming from its partnership with Caribbean-focused Apple Leisure Group, a major provider of packaged vacation. Hyatt may potentially benefit from increased leisure demand in Europe. According to FactSet data, analysts have an average price objective of $127.53 on the company, representing an 11% increase from its current price.
Because of the industry’s natural worldwide focus, cruise-line stocks have increased the leisure industry’s march in 2023. In 2023, the Royal Caribbean Group (RCL) is up 107%, Carnival (CCL) is up 136%, and Norwegian Cruise Line Holdings (NCLH) is up 78%.
According to Stifel analyst Steven Wieczynski, Royal Caribbean might rise another 17% to $120. Despite concerns about a consumer slowdown, he claims that “there is at least another two-to-three-year pent-up backlog in demand.”
Despite an apparent decline in domestic ticket prices, airline stocks have also been on a roll.
According to the U.S. consumer price index, airfares decreased 3% in May after falling 2.6% in April. This doesn’t always indicate diminishing demand; it might just reflect lower fuel prices.
Furthermore, according to J.P. Morgan analyst Jamie Baker, CPI is heavily skewed to domestic statistics, and there is now a year-over-year movement from domestic to overseas destinations.
This explains United Airlines Holdings (UAL), Delta Air Lines (DAL), and American Airlines Group (AAL) outperformance — the US airlines with the most foreign exposure. They have each increased by more than 40% by 2023.
According to FactSet’s consensus price estimates, Wall Street believes Delta stock can increase another 19%, while analysts believe United stock can rise another 18%.
Domestic demand normalization is excellent news for the Federal Reserve in its fight against inflation, but it’s not all bad news for big cap stocks of the travel sector, at least those exposed to the summer international surge.