7 Travel Stocks to Buy as Europe Opens Its Borders

travel stocks - 7 Travel Stocks to Buy as Europe Opens Its Borders

Source: Shutterstock

While the obvious impact of the novel coronavirus is seen in our daily lives — the facemasks, the social distancing and the occasional flare up when some folks lose their marbles — the pandemic has also deeply affected us in broader ways. For instance, that trip to Europe you’ve been saving for was cruelly taken away. But with the region reopening, now may be a time to consider travel stocks.

Now, I’m going to be completely upfront with you early on: I’m still personally skeptical about the general concept of travel stocks. Yes, people are moving out and about. Further, pent-up demand is a real phenomenon, especially with relatively impatient American consumers. But the problem is that millions are still concerned about the Covid-19 crisis. Nevertheless, if I’m wrong about my cautionary perspective, then travel-related investments could bring surprising profitability.

First, if you’re optimistic about a global recovery, you have a series of not insignificant facts on your side. Primarily, Europe wants Americans — at least American tourism dollars. According to a late April 2021 report from the New York Times, the head of the European Commission stated that the European Union will allow vaccinated American tourists to visit. With nearly 118 million of us fully vaccinated, this could be a boon for travel stocks.

Second, tourism represents a major catalyst for the European region. Obviously, you have places like Paris, France that routinely ranks among the most visited cities in the world. But several smaller European countries are heavily dependent on tourism. Because the majority of us were cooped up at home, we’re eager to get out of the house and spend money. This too emboldens the bullish case for travel stocks.

Third, you have upticks across the board regarding transportation. In particular, air travel has been moving higher encouragingly since the pandemic lows. Therefore, if you can handle the volatility risk, you may want to consider gambling on these travel stocks.

Finally, it might be worth noting that because economic activity came to a standstill for several weeks in the U.S., the personal saving rate shot up to astounding heights. This translates to a lot of money that could be spent on Europe, which in turn may bolster these travel stocks to buy.

  • Ryanair (NASDAQ:RYAAY)
  • Air France-KLM (OTCMKTS:AFLYY)
  • InterContinental Hotels Group (NYSE:IHG)
  • Hilton Hotels (NYSE:HLT)
  • Expedia (NASDAQ:EXPE)
  • Lindblad Expeditions (NASDAQ:LIND)
  • Norwegian Cruise Line (NYSE:NCLH)

Travel Stocks to Buy: Ryanair (RYAAY)

a Ryanair plane ready for boarding
Source: Dmitry Birin/Shutterstock.com

When I said above that travel stocks are risky, I meant it. Case in point is Ryanair, the Irish ultra-low cost airliner. Ordinarily, I wouldn’t lead with something like RYAAY stock because it’s traded in the over-the-counter exchange. Usually, if it’s not something OTC-themed, I prefer to lead with a blue chip. You know, something that won’t make you rich but won’t leave you in the gutter.

Here’s the crazy thing about Ryanair. It is the safest travel play you can get on this list based on the trading action at time of writing. Against the prior session, RYAAY stock was just a hair under parity. So, 0% is the best it gets, at least as far as this write-up is concerned. Are you sure you want to get involved with travel stocks?

If the answer is still yes, Ryanair presents an intriguing case. As an Irish carrier, it has limited upside. At the same time, it has limited exposure to what’s going on with the rest of the world. Should tourism pick back up in the British Isles, RYAAY could receive a conspicuous lift. And you’d figure it would be largely a net lift as Ryanair mostly operates within Europe.

Air France-KLM (AFLYY)

image of a plane flying in the sky representing airline stocks
Source: Shutterstock

Prior to including Air France-KLM on this list of travel stocks, I was debating whether to replace it with Delta Air Lines (NYSE:DAL). While American carriers leave much to be desired in my view, Delta levies a strong presence in European travel routes. But the problem is that Delta is very exposed to the American individualistic mentality. Frankly, this is probably one of the factors why we took so long to get out of the coronavirus mess.

Also, DAL absorbed more than a 3% hit on the day that I wrote this. The far more speculative AFLYY stock — also an OTC name — “only” took a 1% hit. So with fingers crossed, I’m boarding Air France-KLM.

Still, let me be clear that this will be a turbulent flight for your portfolio. According to Reuters, Air France-KLM is not seeing evidence of a travel recovery it’s hoping for, with the company posting a wider first-quarter operating loss. Plus, management intends to raise capital, which may put pressure on AFLYY stock.

Why bother including it on this list of travel stocks? Like I said, I’m skeptical but I’ve got editorial obligations to fulfill. However, Air France-KLM isn’t hopeless. According to a Pew Research Center report, more Americans plan to get vaccinated — or already have.

If so, they could boost demand for European carriers. Still, it’s a risky idea so please be careful.

Travel Stocks to Buy: InterContinental Hotels Group (IHG)

InterContinental Hotels (IHG) sign on a hotel
Source: Cineberg/Shutterstock.com

When the coronavirus first rippled throughout the globe, one of the hardest-hit sectors were travel stocks; specifically, those which were tied to the hospitality and lodgings industry suffered an inordinate amount of red ink. It was no surprise, though, given the crackdown on non-essential activities. And relaxing in a resort somewhere is the epitome of non-essential.

Since then, InterContinental Hotels Group has made a robust recovery, with IHG stock gaining nearly 76% over the trailing year. On a year-to-date basis, shares are up over 6%, though investors are clearly getting jittery. In the past five days, IHG has declined by nearly 4%.

As with other travel stocks, 2020 was a rough one for InterContinental Hotels, which saw a year-over-year revenue decline of 48% to $2.4 billion. Therefore, the company needs to produce for its upcoming earnings report or IHG stock could see some volatility.

Nevertheless, if you’re optimistic about a rebound, you may want to hold the course. As Air France-KLM noted on its earnings conference call, increased vaccination could spark bookings on the last minute. In other words, you could incur an opportunity cost if you focus solely on the present bad news.

Hilton Hotels (HLT)

the sign in front of a Hilton (HLT) hotel
Source: josefkubes / Shutterstock.com

Despite a world-renowned brand, that alone hasn’t saved Hilton Hotels from volatility. To be fair, over the trailing year, HLT stock is up over 90%. And on a YTD basis, HLT presently outperforms InterContinental Hotels with a double-digit return (though barely at 10%).

Still, the near-term technical posture is getting shaky. In the trailing month, HLT stock is down 2%. On the day of writing, it absorbed a sizable loss of nearly 3%. Honestly, a quick look at the financials reveals that traders are taking the rational route regarding exposure to Hilton.

Last year, the company’s revenue hemorrhaged by over 54% to $4.3 billion. Even more concerning is its earnings report for the quarter ended March 31, 2021. In it, Hilton posted revenue of $874 million, which is down 54% YoY and down nearly 2% sequentially from Q4.

But as with IHG above, what could end up saving Hilton Hotels is nominally growing vaccinations. Here, I’m going to get a little bit controversial. According to the University of Southern California, “U.S. adults with higher education are significantly more likely to get a COVID-19 vaccination and to believe in the vaccine’s safety and effectiveness.”

And who can afford Hilton Hotels? The more affluent consumers, which in turn are more likely to be educated. While travel stocks are risky, you may be able to squeak some profits off names that cater to the rich.

Travel Stocks to Buy: Expedia (EXPE)

building facade with expedia (EXPE) group logo
Source: VDB Photos / Shutterstock.com

Take a breath and hold onto the safety bar. Expedia is one roller coaster ride that you don’t want to fall off from. Should international travel to popular regions like Europe return with gusto, EXPE is one of the travel stocks I would anticipate would do well. But the current technicals and fundamentals are not pleasant. This means you’re taking a huge contrarian bet with EXPE stock.

According to a Bloomberg report, Expedia did beat estimates for its quarter ended March 31 thanks to a rebound in overall travel. This makes sense from a pent-up demand angle. Essentially, people across the world had to put everything on hold: vacations, graduations, anniversaries, weddings, what have you. So the sentiment of “revenge retail” runs strong. Nevertheless, the comparisons don’t look great.

Particularly, Expedia’s revenue in 2020 suffered a 57% loss to $5.2 billion. Top-line sales haven’t been this low since 2013, which gives many pause. However, I should note that Expedia sales gained sequentially by over 35%, giving hope that travel will boom in earnest.

That’s great news. Someone needs to tell it to the market, though, as EXPE stock shed 6% on the May 12 session. If you see something that the rest of us don’t, this could be a huge winner. But this is a gargantuan risk.

Lindblad Expeditions (LIND)

penguins in antarctica
Source: Shutterstock.com

We’re going to step into the realm of the crazies with the last two travel stocks on this list, beginning with Lindblad Expeditions. A specialist in travel experiences that go well beyond the beaten path, Lindblad is the company you seek when you’re tired of yet another trip to the Eiffel Tower.

Instead, the company greets you with opportunities to explore the mystical natural treasures of Iceland. Or if you’ve really got the exploration bug and want to go full Admiral Byrd, you can take a trip to Antarctica. But the main issue with LIND stock is that the underlying company has a limited audience, which in turn meant that it was devastated from the pandemic.

In 2020, Lindblad generated only $82.4 million in revenue, down a staggering 76%. That’s because in the second through fourth quarters of last year, it only posted $1.12 million. While things are starting to improve sequentially, it’s a rough comparison. In first-quarter 2021, Lindblad rang up less than $2 million in top-line sales.

Basically, unless you’re an extreme speculator, you should stay away from LIND stock. However, it’s possible that because Lindblad caters to the rich and educated (who are likelier to get vaccinated), this could be a surprise upside idea.

Travel Stocks to Buy: Norwegian Cruise Line (NCLH)

Norwegian Pearl, a Norwegian Cruise Line (NCLH) ship, in the middle of the ocean
Source: Vytautas Kielaitis/shutterstock.com

I’m going to be upfront with you: I have extreme reservations about Norwegian Cruise Line. Then again, this is an article about travel stocks to buy so here we are. Nevertheless, I would not buy NCLH stock unless you can handle severe downside risk.

Why the pessimism, you might wonder? Well, aside from the fact that travel stocks related to the cruise ship industry suffered catastrophic losses, this is also the one sector that has been slow to demonstrate any evidence of a recovery.

For instance, in 2020, revenue slipped by an almost unbelievable 80% to $1.28 billion. Of course, most of that came from Q1 2020 results. Subsequent quarters have been a disaster, including preliminary data for Q1 2021. Revenue is coming in at $3.1 million, which is simply a disaster. Not surprisingly, long-term debt ballooned to $12.2 billion, which is simply staggering.

Again, the one saving grace would be mass-scale vaccinations. Further, those aged 65 years and older in the U.S. are most eager to get vaccinated, with 84% of this demographic getting at least one shot and nearly 72% fully vaccinated. And who are more likely to go on cruises? Old people.

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

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.


Article printed from InvestorPlace Media, https://investorplace.com/2021/05/7-travel-stocks-to-buy-europe-reopens/.

©2021 InvestorPlace Media, LLC