With the demand for travel at an all-time high, Maxim Manturov, Head of Investment Research at Freedom Finance Europe, outlines which travel stocks are trending upwards and which new arrivals are ones to watch out for.
2022 has great potential to see a massive recovery and growth in the tourism sector as it is expected the Covid pandemic will move into a less serious ‘endemic’ phase. Many experts remain cautiously optimistic, noting the pent-up consumer demand for travel after Covid-19, as the sector was one of the first and hardest hit by the pandemic. Search engine analysis shows an increase in queries relating to booking flights and travel packages – all great signs for the travel industry.
With this in mind, Maxim shares insight on the best travel stocks to watch in 2022, both in terms of reinvestment and new arrivals in the market.
The best stocks to reinvest in:
Royal Caribbean Cruises. (RCL) could reach pre-pandemic passenger levels within the next year, with exceptionally high bookings for next summer and cruise bookings for all of 2022 reported to be within normal ranges and at higher prices than before the pandemic. In Q3 2021, RCL reported revenues of approx. £339 million, a significant improvement from -£25 million in the previous year. Adjusted loss per share fell to £4.15 from £3.97 a year earlier. Every quarter over 2021 has shown steady performance growth, leading market participants to become cautiously optimistic. The average target price is at £74.26 (about 28% upside).
American Airlines. (AAL) is again seeing growth in travel and its Q3 2021 earnings show revenue of almost £6.6 billion, a 20% increase on Q2 2021. In Q3, AAL reported an unexpected profit of £125.5 million. The airline received at least £4.3 billion in federal payroll support, which helped keep operations running smoothly. AAL expects high demand – more than 6000 departure days – during peak travel periods in Q4 2022. The average target price is at £16.6 (about 37% upside).
Airbnb. (ABNB) has over 5 million listings in 220 countries and regions. The company reported revenues of £1.66 billion and a 29% increase over Q3 2021, up 67% year-on-year and attributed to the loosening of restrictions that allowed more to use the service. Despite the pandemic, the company posted the highest revenue and net profit ever recorded in Q3, with CFO Dave Stephenson remaining hopeful that these current trends will continue into 2022. The average target price at £144.8 (about 36% upside).
Expedia Group. (EXPE) run fare aggregators or metasearch engines that provide destination information to travellers looking for accommodation options online. Like the rest of the travel industry, Expedia has experienced a sharp drop in revenue due to the Covid-19 pandemic. However, its latest results confirm that the dark days may be behind it. In Q3 2021, EXPE reported a net profit of £268 million, up significantly from a loss of £164 million last year and closer to the Q3 2019 figure of £303 million. The Q3 figure of £657 million represents a year-on-year increase of 181% compared to £225 million in the previous year. CEO Peter Kern believes that the company will become much more aggressive when the recovery is well underway. The average target price is at £150 (about 19% upside).
Las Vegas Sands (LVS) operates resorts that include casinos, hotels and conference centres. For Q3 2021, revenue rose 92% year-on-year to £636 million. However, the net loss was £273 million (61 cents per diluted share) compared to a net loss of £419 million (65 cents per diluted share) from the previous year. Despite this, LVS was able to achieve positive EBITDA in each of their markets, as remarked by CEO Robert Goldstein. LVS has more recently been shifting its focus to fast-growing Asian sites, expecting to close a deal in the first half of 2022 of the sale of its Las Vegas property and operations for approximately £4.64 billion. The average target price is at £38 (about 14% upside).
The Continued Success of Booking Holidays
Booking Holdings (BKNG) is a travel technology company, operating several aggregators and metasearch engines for airline tickets, hotels and car rentals. When the Covid-19 pandemic hit, BKNG raised significant amounts of capital with the aim to have enough liquidity for a couple of years. The company also cut costs, aiming to cut staff by 25% globally, and as a result, BKNG’s share balance sheet is completely stable. Between Q2 and Q3 2021, the company’s cash balance has jumped by £2.9 billion to £8.3 billion, making it one of the most reliable travel companies.
BKNG has been heavily involved in mergers and acquisitions (M&A) in the past few months, acquiring Getaroom for £890 million in November 2021 and also currently buying Etraveli Group for £1.36 billion. Meanwhile, their subsidiary Kayak, has led a £44.5 million Series C funding round with Inovia Capital for Life House, wanting to provide independent travellers with an easy way to manage hotels.
In Q3 2021, the reported revenue was £3.48 billion, approaching the Q3 2019 revenue of £3.7 billion. The company’s total revenue for the quarter nearly doubled from just £1.6 billion last year and as much as 77% sequentially. The average target price is at £2087 (about 19% upside).
Expected New Arrivals for 2022:
Turo, dubbed “Airbnb for cars”, is a company that connects car owners with renters. As of the end of Q3 2021, the company had more than 85,000 active hosts, more than 160,000 cars and 1.3 million active guests. Revenue growth accelerated to 207% in 2021 versus 6% in 2020. The company has already submitted a formal IPO application.
Trip Actions is one of the most prominent tech companies in the industry TripActions is interesting for its development of software that helps plan all stages of a trip. The company has raised a total of £1.1 billion and is currently considered one of the IPO contenders in 2022.