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Summer travel is in full swing and the pent-up travel demand has given a boost to travel stocks. About 7.7 million people traveled by air on the Memorial Day weekend while a whopping 71 million people were expected to travel on the Fourth of July weekend. These two are the busiest weekends for travel companies before Christmas.
Airlines and cruise lines are set to carry millions of people this summer. The travel sector is hot and if you want to make the most of the soaring travel spending, invest in these travel stocks ready to take home significant gains. These stocks are trading at a discount and have the potential to move higher when they report results. With the earnings season starting this week, it is time to rebalance your portfolio with high-growth stocks. Let’s take a look at them here.
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Delta Air Lines (NYSE:DAL) is one of the top companies to benefit from the summer travel season. A record 3 million fliers passed through the TSA checkpoints on July 7, setting a new one-day record.
Delta’s extensive domestic and international routes put it in a strong position to benefit from the same. It accounts for over 60% of the domestic market share. However, all airlines are not in that position. While some will be able to dodge the doldrums of high fuel prices and increasing operating costs, many won’t.
The company has recently announced the second-quarter results with a revenue of $15.4 billion, a 5.4% YOY jump and the EPS at $2.36, a significant improvement from the EPS of 45 cents in the first quarter. It is aiming for an EPS of $6 to $7 and a free cash flow between $3 billion to $4 billion for the full year.
For Delta Air Lines, there is a rise in premium travelers and this can help boost the profit. The quarter saw a 10% improvement in premium travel revenue which is why the company is also investing in fancy airport lounges. Its premium revenue comprises 56% of the total revenue. The company has also announced a 50% dividend hike.
Trading at $44, DAL stock is up nearly 10% year-to-date and is a strong buy below $50. Its third-quarter results will be equally impressive and a higher cash flow will lead to lower debt, putting the company in a very strong position in the coming quarters.
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Airbnb (NASDAQ:ABNB) is a top-quality business available at a cheap price right now. Trading at $146, the stock is up almost 10% YTD and much lower than the 52-week high of $170. The company has seen several ups and downs recently which has led to a pullback in the stock. However, I believe the holiday season could benefit it significantly.
In the first quarter, its EPS came in at 41 cents and the quarterly profit jumped 126% YOY. This was also its best first quarter ever with a revenue of $2.14 billion and gross bookings up 12% YOY.
Airbnb has already seen a 400% jump in bookings in Paris for the Summer Olympic Games and will benefit from the summer travel and Christmas holidays in the coming quarters. Now is an ideal time to buy one of the top travel stocks at a discount.
Airbnb is a very strong brand with a solid network that supports its growth. The company makes money by charging fees to the guests and hosts which ensures a steady and stable revenue stream. It has 5 million hosts and more hosts will attract more guests. Since hosting on Airbnb has become a way to make passive income, listing a property on Airbnb has become a no-brainer decision.
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Another airline stock to buy, United Airlines (NASDAQ:UAL) has an extensive network of domestic and international routes. The company reported a net loss of $124 million in the first quarter and saw a 9.7% YOY jump in operating revenue to $12.5 billion. It saw a 10% rise in passenger revenue.
Exchanging hands for $45, the stock is up over 11% YTD and is trying to recover from the impact of the pandemic. It is slowly but steadily reducing losses, expanding revenue and seeing higher passenger traffic. The company has been around for long and has bounced back from several challenges.
United Airlines has suffered recently due to the multiple setbacks faced due to Boeing (NYSE:BA) and the key metrics to watch in the coming quarters are revenue growth and operating expense management. Its future developments with Boeing will also have an impact on the business and the company’s growth prospects.
The management has a clear strategy for growth with efficient cost management and an improvement in free cash flow. While the management’s second-quarter guidance was below expectations, I believe it will be able to beat market expectations with the massive travel demand.
On the date of publication, Vandita Jadeja did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.
