After three-plus months of staying home, self-quarantines and general miserableness from the novel coronavirus, Americans are all too eager to get out of their houses and do crazy things — like going anywhere else. For investors, that means there are now some market opportunities to be found in downtrodden travel stocks to buy.
Sure, the travel sector took a big hit from Covid-19. The ETFMG Travel Tech ETF (NYSEARCA:AWAY) is down more than 20% so far this year, and some of the biggest names in the industry have lost a lot more.
But those names aren’t going to stay down forever. In fact, there’s already some momentum building in the industry as travel restrictions begin to loosen. States are beginning to open up and Americans appear ready to get out and see the world.
Here are four travel stocks to buy right now as the industry gathers itself for recovery. The trip may be a slow one should the U.S. economy continue to falter, but for long-term investors, the potential returns from these names are enticing:
- Royal Caribbean (NYSE:RCL)
- Delta Airlines (NYSE:DAL)
- Booking Holdings (NASDAQ:BKNG)
- Winnebago Industries (NYSE:WGO)
Let’s take a closer look at these travel stocks.
Travel Stocks to Buy: Royal Caribbean (RCL)
I’ve made no secret about my affinity for RCL stock. I bought shares in March after writing this story for InvestorPlace and haven’t regretted it for a second.
And why would I? It wasn’t that long ago that Royal Caribbean stock was more than $130 per share. I bought it at $22 and its now over $60.
But cruising is a way of life for some people. About 30 million people took a cruise in 2019, up from 17.8 million in 2009. When the CDC allows cruises to resume — either later this year or in 2021 — Royal Caribbean will be there. So will its customers.
RCL says it’s burning about $250 million a month right now, and with $2.3 billion in cash or cash equivalents currently on hand, it should be fine to get through the stormy patch.
And the upside? At today’s prices, you can reasonably expect to double your investment in two years or so. I’ll take that all day.
Travel Stocks to Buy: Delta Airlines (DAL)
No list of travel stocks would be complete without a major airline, but which of the big four do you choose? For my money, it’s Atlanta-based Delta, which is up about 60% over the past month.
I’m a fan of DAL stock because the company is doing an outstanding job of managing costs and maintaining long-term fiscal health. In a pandemic, you can’t ask for more than that.
Delta was burning more than $100 million a day in March but has gotten that down to about $40 million. Beyond tightening expenses, the company has plenty of cash to help get it through the pandemic, including more than $10 billion raised since March.
Earnings in the second quarter won’t be great, but I’m expecting DAL stock to rebound in the second half of the year.
Travel Stocks to Buy: Bookings Holdings (BKNG)
It’s not too often that you can say a stock priced at more than $1,600 per share is a bargain. But when you look at BKNG stock these days, the sale price leaps off the page.
First, look at the price-earnings ratio of 20.51. That’s entirely reasonable when you consider the P/E of the S&P 500 right now is north of 22.
By comparison, TripAdvisor (NASDAQ:TRIP) carries a P/E of 32 right now, while poor Expedia (NASDAQ:EXPE) isn’t turning a profit at all.
BKNG stock is down more than 20% so far this year, but it wasn’t that long ago shares were worth more than $2,000 a piece. As travel volume begins returning, and as people decide they are ready to see the world, Booking’s customer base will return, and so will the outsized profits.
Travel Stocks to Buy: Winnebago Industries (WGO)
Not everyone who wants to travels wants to stay in a hotel. In fact, we may even see the number of hotel-adverse travelers increase a bit after the coronavirus made us all more health-conscious. But that doesn’t mean people will be stuck at home.
WGO stock is a bet on travelers who want to go at their own pace and keep to themselves. Nothing says freedom plus safety like cruising the highway in a Winnebago, right?
WGO reports earnings on June 24, and analysts are expecting revenue of $348.93 million, which would be down 34% from a year ago. The company is expected to post a loss of 28 cents per share.
But there’s cause for hope. Winnebago restarted operations in April and May. Per The Motley Fool:
“[WGO management is] … cautiously optimistic about several indicators within the outdoor industry, including an uptick in campground reservations and marina traffic in select areas, continued low gas prices and interest rates, easing of stay-at-home restrictions in some states leading to increased commerce conditions, and improved access to some state and national parks.”
WGO stock rose jumped 60% in April and 23% in May, and is now challenging all-time highs.
Patrick Sanders is a freelance writer and editor in Maryland, and from 2015 to 2019 was head of the investment advice section at U.S. News & World Report. Follow him on Twitter at @1patricksanders. As of this writing, he was long RCL and DAL.
