SPECIAL REPORT The Top 7 Stocks for 2024

7 Airline and Cruise Stocks to Watch as Travel Picks Up


travel stocks - 7 Airline and Cruise Stocks to Watch as Travel Picks Up

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Vaccinations in the U.S. are happening at an accelerating pace. No one thought it would be possible to have this many vaccinations at this stage, which has allowed the reopening trade to really flourish in the stock market. As a result, travel stocks have come to life. 

These stocks are not the only ones to benefit. For instance, financial and energy stocks have been doing well. 

However, travel stocks have really been in the spotlight. Investors are very keen to the idea that people will want to get out and about once they feel safe to do so. Once the vaccines hit a tipping point in regard to the population, this industry should experience a boom. 

Even though the labor market still needs to improve, there are plenty of people that have a vacation or two on their mind. After being cooped up for a year now, the public is ready to fly, cruise and vacation. 

Let’s look at seven travel stocks set to take advantage. 

  • Southwest Airlines (NYSE:LUV)
  • Delta Air Lines (NYSE:DAL)
  • Spirit Airlines (NYSE:SAVE)
  • Carnival Cruise (NYSE:CCL)
  • Norwegian Cruise Line (NYSE:NCLH)
  • Hawaiian Holdings (NASDAQ:HA)
  • JetBlue Airlines (NASDAQ:JBLU)

Travel Stocks to Watch: Southwest Airlines (LUV)

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The reopening trade has been gaining momentum for months and nowhere is that more evident than airlines. So in that regard, we went with the strongest of the group: Southwest Air. 

Since the Covid-19 pandemic, the airline space has been hammered. However, the group has rebounded pretty impressively given the underlying obstacles the industry still faces. 

Amid that rebound, Southwest has recently made a new 52-week high. 

If we back the measure out to the three-year high, we get a mixed message. 

On the plus side, Southwest has turned in a performance that outstrips its closest competitors. But it’s still only up 11% over the last three years, which isn’t exactly lighting up the board. 

In any regard, if investors are looking to plunk down some cash on the airlines, perhaps they will consider Southwest. Generally speaking, this is considered the airline with the strongest financials and best balance sheet. If that matters to investors, they’ll find comfort in this name. 

Delta Air Lines (DAL)

Delta Airplanes sit in a row at Kansas City International Airport

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Curious as to what airline stock’s performance was closest to that of Southwest? It was Delta Air Lines. 

Like Southwest, it has one of the better balance sheets in the industry. The company is sticking to a number of different policies, hoping to retain customers during this difficult stretch. 

The company continues to block the middle seat on its flights and has impressive flexibility when it comes to trip cancellations and flight changes. Delta continues to put the customer first and management has been very transparent with its outlook. 

Most recently, here’s management’s candid outlook for the industry:

“We see three distinct phases in 2021. The early part of the year will be characterized by choppy demand recovery and a booking curve that remains compressed, followed by an inflection point, and finally a sustained demand recovery as customer confidence gains momentum, vaccinations become widespread and offices re-open.”

Delta should see a strong uptick in business as the vaccine gains traction ahead of schedule. That should allow revenue to flow through and hopefully bolster the bottom line. 

Spirit Airlines (SAVE)

A yellow, Spirit Airlines (SAVE) branded airplane flying in the air

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One of the travel stocks that continues to fly under the radar? Spirit Airlines.

Considered a budget airline by many, the company has built an enviable position in the airline space. When traveling opens back up and as the vaccination rate continues to increase, the airline space is going to see strong demand. 

Customers will want to travel for the summer, see family and take their first trip in ages. 

That’s going to lead to solid booking trends with Spirit. From management

“Our leading low-cost structure remains a key advantage and positions us well to compete in this environment and beyond …While the road to recovery is anticipated to be choppy, we are confident we will be among the first U.S. carriers to return to profitability.”

Further, Spirit has quietly built one of the stronger balance sheets in the industry, while its cash burn is among the lowest. 

Carnival Cruise (CCL)

Carnival (CCL) cruise ship on water in front of beach with chairs

Source: Flickr

Perhaps one of the more popular cruise stocks is Carnival Cruise. Up over 100% since Oct. 30, it’s the best-performing stock among the major cruise operators. 

Does that make it one to stick with? 

Well, it’s also worth noting that CCL recently made a fresh 52-week high north of $30. 

The fact that Carnival (and its peers) are doing so well is stunning, given that they are experiencing a massive decline in revenue. When sailings cease, revenue dries up. Then there’s no profit or positive cash flow to be seen. 

But an increase in debt and a capital raise or two can fix those short-term problems. What investors are betting on is pent-up cruise demand. Some consumers will never consider setting sail on one of these ships, but there’s a huge portion of travelers that love cruising. 

When it opens back up, there will be plenty of demand for these businesses. With Carnival’s new ships ready to hit the waters, the company will be ready to soak up the excess demand. 

The question is, will investors sell the news once cruising is back in style?

Norwegian Cruise Line (NCLH)

Norwegian Pearl, a Norwegian Cruise Line (NCLH) ship, in the middle of the ocean

Source: Vytautas Kielaitis/shutterstock.com

If they don’t sell the news, Norwegian Cruise Line should also be a big winner. 

With a market capitalization of just $11 billion, NCLH is the smallest of the three major cruise lines. It’s about one-third the size of Carnival, for instance. 

Again, there may be a hesitancy to bid up cruise stocks on account of the no-sail orders. But those who are willing to invest may want to look at the balance sheet. 

Carnival has more cash than Norwegian, but when liabilities are taken into account, the latter shouldn’t be ignored. The company has $3.3 billion in cash and equivalents and total current liabilities of $1.9 billion. Norwegian’s cash position has swelled as it looks to hold out through the storm and get back to work once cruising opens back up. 

Until then, its cash position is up more than ten-fold vs. the same period a year ago. While current liabilities are actually down (thankfully), total non-current liabilities have gone from $6.5 billion a year ago to $12.1 billion. 

So the balance sheet didn’t make it out unscathed, but how could it? At least from a liquidity standpoint, Norwegian seems fine. 

Hawaiian Holdings (HA)

a close-up shot of an airplane engine

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I think Hawaiian Holdings is an interesting one here. It’s another one that recently made fresh 52-week highs

The company has a dominant position in intra-island flights between Hawaii and was a leader in flights to and from the mainland to Hawaii. Of course, the pandemic dealt a stunning blow to Hawaiian Holdings. 

While Delta, Southwest and others still had operations for other purposes, the main purpose for flying to Hawaii is recreation. However, with the state taking steps to reopen recently, Hawaiian doubled its capacity in Q4 vs. Q3. 

The caveat is that capacity was still down 72% year over year in Q4. Still, the trend is going in the right direction. From the company

“During the fourth quarter, the Company reinstated non-stop service from Honolulu to Las Vegas, Phoenix, San Jose, Oakland, New York and Boston, restoring service to all of its pre-pandemic origin points on the U.S. mainland, as well as non-stop service from Honolulu to Tokyo-Haneda, Japan; Osaka, Japan; and Seoul, South Korea.”

JetBlue Airlines (JBLU)

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Another regional airline investors may want to consider? JetBlue Airlines.

When investors are looking cheap for cheap airline stocks, American Airlines (NASDAQ:AAL) is often where they turn their attention. From a trading perspective, perhaps that’s where they ought to look. From an investing perspective, though, it may be worth turning over a few stones from JetBlue. 

The company is just a stone’s throw off its 2020 pre-coronavirus high, as bulls bid this one higher with enthusiasm. Maybe that puts the stock at a disadvantage for a possible “sell-the-news” reaction. 

However, as flight capacities start to inch higher, JetBlue stands to benefit. Further, with more than $3 billion in cash and short-term investments, the company’s balance sheet should be in good enough shape to get JetBlue across the finish line. 

This stock has serious momentum. The question will become, “how long can it last?” 

On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.

Article printed from InvestorPlace Media, https://investorplace.com/2021/03/7-airline-and-cruise-travel-stocks-to-watch-as-travel-picks-up/.

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