This has been a forgettable year for most companies, but it has been a year of resurgence and reincarnation for some firms. The sales of airport spa operator XpresSpa Group’s (NASDAQ:XSPA) were stunted for the past three years, and it was struggling to earn profits. However, its recent decision to convert its spa spaces into coronavirus testing centers promises to breathe new life into XSPA stock.
Moreover, its goal of offering other types of tests could propel its stock higher over the long-term. It is currently trading well below its June highs of over $7 and presents an attractive value play.
XpresSpa’s strategic change is already bearing fruit, as the firm is quickly expanding its testing centers to various airports across the USA. It is also partnering with top airlines to provide on-site testing services. The company’s goal is to expand beyond Covid -19 testing by diagnosing other viruses as well. Airport testing is here to stay, and such measures are key to speeding up airlines’ recovery.
XpresSpa’s Future Goals
XpresSpa recently provided an update on its strategy and its health and wellness goals. In its third quarter, the company did not reopen any spa facilities, and it does not anticipate relaunching most of them in the near-term. The only exception so far is in Dubai’s international airport, where two of its spas were reopened in July to underwhelming traffic. It appears that the company is going all-in with its airport-testing plans and hopes to transform its business for good.
XpresSpa has made some significant strides with its XpresCheck brand and plans to expand its service capabilities and facilities rapidly. In October, it started additional testing for conditions besides Covid-19, including influenza, mononucleosis, and other communicable diseases. It is also offering flu vaccinations and higher-dose flu vaccines for the elderly. Finally, it will be administering the Covid-19 vaccine after receiving approval to do so from the FDA.
Doug Satzman, XpresSpa Group CEO, said:
“Our framework for a travel health and wellness brand that will transform the way people access healthcare through technology and personalized services is coming together, and we intend to share more specific details on our plans as time unfolds.”
So it’s clear that XpresSpa plans to cement its position in the airport-testing niche and offer more holistic health and wellness offerings in the future.
A significant positive for the company is its strong liquidity position. As of September 30, its cash balance stands at $61.9 million, with only $14.3 million in current liabilities. During the first nine months of the year, it raised roughly $74.1 million through registered direct-equity offerings. As a result, it has enough funds to finance its business plans for the next year.
Demand for Airport Testing
Covid-19 has literally turned the airline sector on its head. Several experts believe that many of the changes that affected the sector this year are likely to be permanent. Meanwhile, the social-distancing measures, frequent testing, and constant sanitization have become a bit of a pain for most travelers. Consequently, airlines are considering implementing rapid, pre-flight testing in an effort to avoid those cumbersome measures.
It is believed that effective pre-flight testing could greatly accelerate the recovery of airline traffic. Moreover, data supports the notion that testing could significantly improve consumers’ confidence in flying.
According to a survey conducted by the Global Business Travel Association (GBTA), 76% of respondents feel that rapid testing is the best way to reopen international travel. Given the way things have panned out this year, pre-flight testing could become a mainstay for the airline industry.
The Bottom Line on XSPA Stock
XpresSpa is a classic example of “when life gives you lemons, you make lemonade.” It has reinvented itself by taking advantage of the opportunities created by the global pandemic. The company has essentially rebranded itself and is now looking to establish its dominance in airport testing. So far, it appears that airport testing will become a pivotal part of the airline industry even after the Covid-19 vaccine becomes widely available.
Further, XSPA stock is cheap, so it’s best to grab this value play before it gains handsomely next year.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article
