As the Covid-19 crisis initially capsized global societies, many daring investors targeted travel stocks to buy for the long haul. Their thinking centered on the eventual comeback effect. Once government restrictions faded, people who developed cabin fever would want to get out of the house. Known colloquially as revenge travel, this phenomenon bolstered several travel-related enterprises.
In 2023, it’s possible that we can see another last hurrah for certain travel stocks to buy. To be sure, consumer economy woes stemming largely from skyrocketing inflation dampened discretionary sentiment. Nevertheless, a recent CNBC article pointed out that Generation Z may provide a serious uptick. Though they may be short on cash, they desire experiences.
Basically, Gen Z marches to their own beat. And unlike other generations, this age cohort desires the expanding of horizons, mostly because of social media exposure. Therefore, even with challenging circumstances, the below travel stocks may see an upside.
Booking Holdings (BKNG)
Based in Norwalk, Connecticut, Booking Holdings (NASDAQ:BKNG) owns and operates several travel fare aggregators and travel fare metasearch engines. Arguably, its most popular site is Booking.com. Further, it operates websites in about 40 languages and 200 countries, making it popular with the global Gen Z crowd. Additionally, Booking.com’s commercials – which include relevant actors like Idris Elba – should appeal to younger travelers.
Financially, Booking offers a very solid canvas. First, its balance sheet delivers many stable metrics, including an Altman Z-Score of 5.79, thus reflecting low bankruptcy risk. Operationally, the travel specialist prints a three-year revenue growth rate of 7.2%, above 77% of companies listed in the travel and leisure industry. Also, it’s highly profitable, posting a trailing-year net margin of 17.89, above 84.68% of its peers.
Finally, Wall Street analysts peg BKNG as a consensus moderate buy. Their average price target is $2,789.57, implying nearly 4% upside potential. While it’s not one of the travel stocks to buy for becoming rich, BKNG should steer true.
A world-renowned hospitality giant, Hilton (NYSE:HLT) doesn’t immediately stand out as one of the travel stocks for Gen Z. Typically focusing on a higher-income crowd, Hilton generated upside recently, perhaps on anticipating wealthier consumers vacationing. Since the start of the year, HLT gained over 18% of its equity value.
Nevertheless, Hilton features some “fighter” brands, in particular Canopy by Hilton and Tru by Hilton. Focused on trendier, cozier lodgings but with an upscale vibe, the iconic hospitality firm is well-positioned to attract young customers. Moreover, Hilton’s competition in the home-rental space incurred some worrying trends. Thus, the hotel might be able to bank on its generally positive reputation.
As with other lodging enterprises, Hilton’s financials reflect the impact of the Covid-19 crisis. However, the company’s consistently profitable, featuring an impressive net margin of 14.3%. Lastly, covering analysts peg HLT as a consensus moderate buy. Their average price target stands at $155.10, implying nearly 5% upside potential.
Live Nation Entertainment (LYV)
An American global entertainment company, Live Nation Entertainment (NYSE:LYV) promotes, operates, and manages ticket sales for live entertainment in the U.S. and internationally. Because Gen Z desires experiences over products, Live Nation fundamentally offers a tangentially relevant idea among travel stocks to buy. Still, it might require some tolerance for risk.
In particular, LYV gave up 39% of equity value in the past 365 days. Unfortunately, Live Nation hasn’t kept its nose clean from controversy, drawing the ire of Taylor Swift fans. Long story short, people couldn’t get access to the tickets, leading to many falling into the hands of scalpers. Still, scalping is basically one of the oldest capitalistic practices so the furor might fade away.
To be sure, LYV ranks among the riskiest travel stocks to buy not because of the aforementioned controversy but because of its less-than-great financials. Nevertheless, it might be undervalued based on free cash flow (FCF). To close out, analysts peg LYV as a consensus moderate buy. Their average price target comes out to $85.57, implying nearly 28% upside potential.
Speaking of controversy, Disney (NYSE:DIS) finds itself in the middle of a national debate. Last year, the Magic Kingdom under then CEO Bob Chapek criticized Florida’s Parental Rights in Education bill. In response, Florida Governor Ron DeSantis seemingly retaliated, targeting Disney World’s special tax district in his state. As of now, the controversy continues to spill over, clouding what should be the happiest place on Earth.
Nevertheless, I believe Disney should benefit from the uproar, making DIS one of the travel stocks to buy. As a diverse cohort, the Pew Research Center states that Gen Z unsurprisingly supports progressive political views. Therefore, you might see young folks visit Disney World out of spite of Governor DeSantis. Second, going to Disney World might be a bucket list item for millions of Gen Z members.
On the financial front, Disney is a work in progress as it recovers from the pandemic. That said, it posts a solid three-year revenue growth rate of 2.7% (relative to the industry). Also, it’s consistently profitable. Turning to Wall Street, analysts peg DIS as a consensus strong buy. Their average price target stands at $129.17, implying nearly 30% upside potential.
Southwest Airlines (LUV)
Diving into the trickier names among travel stocks to buy, Southwest Airlines (NYSE:LUV) ordinarily should be an easy buy. However, Covid-19 did a number on the air travel industry. Moreover, Southwest incurred significant damage. During the winter holiday season last year, the airliner suffered a severe disruption, leading to hefty losses. More recently, the company got hit with delayed or canceled flights, reminding investors of the prior painful incident.
Nevertheless, with Gen Z poised to travel in earnest this year, Southwest might deserve consideration among contrarian investors. Take aside its hiccups, the company ranks among the top discount airliners. Given that Gen Z is short on cash compared to other adult generations, LUV might fly higher.
Financially, it’s clear that Southwest operates in recovery mode from the pandemic’s devastation. For instance, the company’s long-term sales trend sits in negative territory. Still, the market prices LUV at a forward multiple of 10.63, which is undervalued. Looking to the Street, analysts peg LUV as a consensus moderate buy. Their average price target stands at $42.58, implying over 32% upside potential.
Royal Caribbean (RCL)
Plying its trade in an industry that represented the poster child of the devastation of the Covid-19 pandemic, Royal Caribbean (NYSE:RCL) might not be for everyone. Still, if we’re just talking about performances on a year-to-date basis, RCL ranks among the top travel stocks to buy. Since the January opener, shares gained more than 29% in equity value.
Fundamentally, Royal Caribbean might do well among Gen Z because it provides myriad experiences. First, there’s the whole angle of going out to sea. During the cruise itself, patrons can enjoy several activities. When reaching the ultimate destination, adventures await on that journey as well. Put another way, cruises offer significant bang for the buck. Regarding the financials, let’s be clear about something: Gurufocus warns that it could be a value trap. Unsurprisingly, the pandemic and the subsequent government restrictions did a number on the industry.
Still, analysts peg RCL as a consensus moderate buy. Their average price target comes out to $84.11, implying over 33% upside potential.
Uber Technologies (UBER)
While it ranks among the riskiest travel stocks to buy, should Gen Z bolster the underlying sector, investors may want to consider Uber Technologies (NYSE:UBER). The company that basically introduced the sharing-economy concept to the public, Uber delivers a compelling profile. Notably, the Pew Research Center stated in 2019 that more Americans have been using ride-hailing apps.
Obviously, young people gravitate toward this arena but that’s a minor angle for travel stocks to buy. Much more significant is that young folks grew up using platforms like Uber. As well, since the service is tied to the Uber platform, you don’t really need to speak the language of the driver. Instead, you essentially upload your key stats, making the ride (generally speaking) a pleasant and convenient experience.
However, Gurufocus also warns that UBER may be another value trap. Profitability and fiscal stability represent ongoing concerns. Nevertheless, if you want to take a shot, analysts peg UBER as a consensus strong buy. Their average price target pings at $48.19, implying over 56% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.