For a while, it seemed as if the markets would continue dancing to their own tune. However, the disconnect between terrible economic metrics and rising equity indices came to a halt on Wednesday. That was when Federal Reserve Chair Jerome Powell warned that further stimulus was necessary to support recovery efforts. One of the companies that sank following the news was Hilton Hotels (NYSE:HLT). Frankly, HLT stock is in urgent need of a catalyst.
When the novel coronavirus first started wreaking havoc within America’s borders, Hilton rapidly lost favor with investors. The subsequent stay-at-home orders further squeezed HLT stock. Just as bad, associated industries, such as the airliners, took a dive on a near-complete collapse of passenger traffic. Even with most states reopening with certain limitations, the fear factor is a nagging headwind.
After all, this is primarily a health crisis. The ensuing economic calamity is some sort of sick “bonus.” Nevertheless, I’m still optimistic about HLT stock and no, I haven’t lost my mind.
Mainly, I view this terrible backdrop as a temporary setback. While traffic volume is down worldwide, the show eventually has to go on. As I’ve discussed in prior articles, the U.S. has suffered many outbreaks and pandemics. Each time, we have come back stronger than ever.
Moreover, Hilton stock has demonstrated its own durability. During the energy crisis and broader market shakeup in the middle of last decade, Hilton shares slid sharply before roaring back. In 2018, during the onset of deteriorating U.S.-China relations that eventually led to a heated trade war, shares again tripped badly before putting up a remarkable comeback in 2019.
More than likely, we’ll see a similar narrative play out again.
The Inefficient New Normal Is a Hidden Catalyst for Hilton Stock
Of course, a major counterargument to this bullish argument is that the coronavirus changed both the workplace and personal behaviors. With state governments shutting down non-essential services, that forced companies to seek work-from-home solutions. And they found exactly that thanks to companies like Zoom Video Communications (NASDAQ:ZM) and Slack Technologies (NYSE:WORK).
Thus, the thinking goes, if businesses can successfully operate remotely, managers will be tempted to cut expenditures related to travel. Why bother setting up meetings when you can video conference instead? With less travel, that spells less demand for associated spend like hotels. Obviously, that would not be favorable to Hilton stock.
While a reasonable perspective, I also think this overstates how effective the new normal of the workplace really is. Look, I’m all about banking on tomorrow’s technologies and innovations. But some factors, such as the importance of face-to-face business meetings, will never go out of style.
For one thing, today’s work-from-home solution is merely a stopgap. As sociological research indicates, workers are generally more productive in the office than at home. That’s because when the cat is away, the mice like to play. Recent surveys reflect that this adage is still relevant.
It’s fair to point out that some workers perform better at home than others. But until companies can figure out an effective balance, the physical aspect of the professional environment won’t go away. Therefore, HLT stock can still expect business demand once society normalizes.
Second, advanced technology doesn’t always mean superior results. There are both tangible and intangible benefits associated with doing business in person. Indeed, these little details that teleconferencing can’t replicate could be the difference between securing a deal or letting your competitor steal it.
Travel Demand Poised to Surge
Another reason to stay positive on HLT stock is that once workers return to the office, so too will demand for personal travel. After being stuck at home for months – and many still waiting to get the green light – Americans are ready to venture out. We’ve never been the type of people to cower in fear and we’re not going to start with the coronavirus.
However, a significant contributing factor to why Hilton shares have so far been deflated is immediacy bias. Essentially, people are assuming the worst because that’s our current situation. But if you take the time to see the bigger picture, you’ll realize how irrational this fear really is.
Along with countless epidemics, this is a nation that has endured countless acts of terror, acts of God and two world wars. I’m pretty sure we can handle the coronavirus. Once the masses also come to this realization, the floodgates will open. Therefore, don’t let the present negativity distract you – Hilton is one of the best discounts you can get right now.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.