And last week, the European Union said it will begin to allow in vaccinated travelers from countries with low infection rates — and some member countries are swinging their doors open even wider than that. About two weeks ago, Broadway leaders said they will raise curtains once again in mid-September, after well over a year of silence.
The EU expects to have its “vaccine passport” program in place by July 1.
Meanwhile, as the number of post-pandemic travelers keeps rising, prices are soaring as well.
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We all can see that gasoline prices are at their highest level since 2014 just by looking at our credit card statement. But if you haven’t priced a plane ticket yet, you may not realize that, according to data last week from Bernstein Research, domestic fares are up 9% since April 1, while international fares are up 17%.
If you haven’t booked your summer getaway yet, do so now, as fares and hotel room rates are continuing to rise.
Vacation is back — and, in some ways, more expensive than ever.
But not everywhere.
An Unequal Recovery
Instead, travel is recovering in fits and starts, buffeted by on-again/off-again Covid-19 restrictions and regional policies. Not surprisingly, travel is recovering most visibly in places where vaccination rates are rising most rapidly.
For example, even though Thailand is looking to reopen some tourist destinations to vaccinated visitors, the National Economic and Social Development Council of Thailand said yesterday that it could take another five years before tourism in that nation returns to normal.
Major markets like India and Brazil are also going to take longer to recover fully.
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As the chart below shows, a rapidly growing percentage of Americans have received a vaccination dose. That uptrend is helping to produce a similar uptrend in “traveler throughput,” according to Transportation Security Agency data.
The connection between a rising vaccination rate and rising travel activity is obvious and direct. This connection explains why air travel in the United States has been improving at a faster rate than the rest of the world.
Most travel-related stocks reflect this buoyant trend. Southwest Airlines Co. (NYSE:LUV) stock, for example, has climbed all the way back to its pre-Covid levels.
But in the May issue of Fry’s Investment Report, I spotted an outlier. This travel company is still languishing 40% below its pre-pandemic levels … even though the company’s business is clearly gathering steam.
And that means it has more gains left in its tank than most travel trades …
The AI-Powered Travel Company
The reason: This travel company reported quarterly earnings that missed the mark on almost every applicable metric.
Revenues fell well short of what analysts expected. Earnings also missed the mark by a large margin.
Free cash flow slumped to levels even worse than what it reported in each of the two previous quarters.
None of that is good. Covid-19 really put a hurting on the travel industry over the past year, though, so it’s not surprising.
However, I’m confident that a comeback is in the making.
Moreover, this company is a travel industry technology leader. That means it fits perfectly into our Technochasm megatrend.
Its technological tentacles reach into almost every facet of the worldwide travel industry. Not surprisingly, therefore, when the Covid-19 pandemic torpedoed travel activity, this company’s revenues tumbled. The company’s second-quarter 2020 revenues collapsed more than 90% year-over-year … and its share price also collapsed.
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But there’s no mystery here. As the pandemic continues to recede, travel activity will keep increasing … and this company’s revenues will climb. The share price should follow.
The company has not been simply sitting on its hands during the last year, waiting for the inevitable recovery. Instead, it has taken decisive steps to fortify its IT infrastructure and artificial intelligence (AI) capabilities.
In other words, it is widening the Technochasm between itself and its competitors.
Stock market reaction to the disappointing earnings report was both immediate and ruthless. The company’s stock tumbled 17%.
From my perspective, this first-quarter report does not alter the investment rational in any significant way. It merely delays it somewhat.
The bet here has always been a bet on a travel industry recovery. It still is … and I think that bet is still a good one.
In fact, I think it’s an even better bet now that this company’s shares have been knocked around a bit.
So, I believe the knee-jerk reaction to the company’s poor earnings report is providing a great opportunity for my Fry’s Investment Report members.
Bottom Line
I consider this company to be an excellent speculation on recovering travel. To make this play as an Investment Report member, click here.
Regards,
Eric Fry
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On the date of publication, Eric Fry did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
Eric Fry is an award-winning stock picker with numerous “10-bagger” calls — in good markets AND bad. How? By finding potent global megatrends… before they take off. In fact, Eric has recommended 41 different 1,000%+ stock market winners in his career. Plus, he beat 650 of the world’s most famous investors (including Bill Ackman and David Einhorn) in a contest. And today he’s revealing his next potential 1,000% winner for free, right here.
