In this article, we will assess 10 Best Travel and Leisure Stocks to Buy Now.
Prior to COVID-19 pandemic, travel and tourism sector was one of the most important sectors in the world economy. The sector made up ~10% of global GDP and was responsible for 320 million jobs worldwide, as reported by the IMF. After first case was identified in Wuhan, China, COVID-19 was declared a pandemic outbreak. Due to lockdowns and ban on international travel, global hospitality and tourism sector saw significant losses.
Recovery Phase of The Industry
As per first UNWTO World Tourism Barometer of the year, international tourism closed 2023 at ~88% of pre-pandemic levels, with estimated ~1.3 billion international arrivals. UNWTO World Tourism Barometer gives a brief overview of the sector’s performance in 2023, assessing recovery by global region, sub-region and destination. The Middle East led this recovery in relative terms. It was the only region to overcome pre-pandemic levels as the region saw arrivals 22% above 2019. Europe touched 94% of 2019 levels, aided by intra-regional demand along with travel from the US.
Experts believe that stage is all set for resilience and rapid recovery of travel and tourism sector, with pre-pandemic numbers anticipated by 2024 end. Rebound is having a solid impact on several economies, jobs, growth and opportunities for communities.
Despite a range of economic uncertainties and geopolitical tensions, the travel & tourism sector continues to thrive. International tourism flows bounced back at a strong pace and should fully recover by 2024 end. That being said, recovery remained uneven, and challenges still remain.
After declining ~68.3% in 2020 – which was marginally below the drop of ~72.3% globally – by 2022-end, international tourist arrivals to OECD countries recovered to ~77.3% of 2019 levels. This was ahead of ~66.6% globally. OECD countries made up ~65% of international tourism arrivals in 2022, exhibiting a rise from ~56% in 2019. This highlighted stronger performance as compared to non-OECD countries since the COVID-19 pandemic.
2023 built the momentum, and evidenced that there is still an unwavering passion for travel. This paves the way for a strong year in 2024.
Future Prospects of Travel and Tourism Industry
The World Travel & Tourism Council expects record-breaking year for travel & tourism sector in 2024. Data suggests that the sector’s global economic contribution is expected to touch all-time high of $11.1 trillion. Travel & Tourism should be able to make additional contribution of $770 billion over the previous record. This will help the industry regain its stature of global economic powerhouse. By 2034, travel and tourism is expected to account for ~11.4% of the entire economic landscape, with the contribution as high as $16 trillion to broader global economy.
Tourism and hospitality is on the cusp of disruption. Shift in source markets and destinations, higher demand for luxury traveling, and innovative business strategies are expected to improve the industry landscape.
As per McKinsey & Company, China’s $744 billion domestic travel market has been categorized as the world’s 2nd largest. Even after the opening up of borders, Chinese travellers prefer staying close to home. Resultantly, domestic destinations continue to benefit. Changchun (known for Changchun Ice and Snow Festival) saw 160% year over year growth in visitors in 2023. In 2024, domestic travel during Lunar New Year surpassed pre-pandemic levels by ~19%. As a result of this, some Chinese travel and tourism stocks saw their share prices move northwards.
China’s domestic travel market should grow by ~12% annually and surpass the United States’ to be counted as the world’s largest by the year 2030.
One of the signs of increased demand in the travel industry is growth in aircraft orders in the aerospace industry. We covered this back in July in 10 Best Aerospace and Defense Stocks to Buy Now, here’s a short excerpt from that article:
“While sharing his insights on commercial aviation at the Morningstar Investment Conference in Chicago on June 26, Tony Bancroft from Gabelli Funds said that he had noticed a significant growth in aircraft orders lately, with both Airbus and Boeing having a 12-year backlog of orders. He believes there are three reasons driving it. The first catalyst, according to him, is China which accounts for 20% of the growth in orders to cater to the growing middle class in both China and India who want to travel more. Another critical factor he cited during his talk was that business travel has finally returned to the 2019 pre-pandemic level. Lastly, Tony highlighted the rising middle class in the United States, and the world, which is increasing air travel and contributing to the economic growth in the industry.”
With that, let’s take a look at the 10 Best Travel and Leisure Stocks to Buy Now.
10 Best Travel and Leisure Stocks to Buy Now
Our Methodology:
For this list, we sifted through 2 ETFs i.e., Defiance Hotel, Airline, and Cruise ETF and Amplify Travel Tech ETF. Then, we chose the companies with most hedge fund investors holding stakes in them, by using Insider Monkey’s Q1 2024 database. These stocks are in ascending order of hedge fund investors having positions in them.
“Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).”
10 Best Travel and Leisure Stocks to Buy Now
10) Trip.com Group Limited (NASDAQ:TCOM)
Number of Hedge Fund Holders: 49
Trip.com Group Limited (NASDAQ:TCOM) is the largest online travel agent in China. The company is well-placed to benefit from rising demand for higher-margin outbound travel as passport penetration is just ~12% in China.
The company released its unaudited financial results for 1Q 2024. FY 2024 kicked off with significant rise in both domestic and outbound travel demand in China. This demand stemmed from stabilized supply and further relaxation of the visa requirements.
Revenues were US$1.6 billion, which were approximately in line with analysts’ expectations. Statutory earnings per share (EPS) crushed analysts’ expectations, with the figure reaching US$0.88. EPS was ~86% ahead of the estimates. Analysts at Citigroup upped their price target on shares of Trip.com Group Limited (NASDAQ:TCOM) from $53.00 to $55.00, giving it a “Buy” rating on April 1st. The consensus price target for the company’s shares is at $66.13.
During previous 3 years of stock price appreciation, the company was able to compound its EPS at ~37% per year. However, the average annual share price rise came in at ~11%. This is lower than overall EPS growth. Hence, investors became more cautious while building position in this stock. Moving forward, experts believe that Trip.com Group Limited (NASDAQ:TCOM) might see healthy growth.
Travel and tourism industry mainly gets support from overall economic growth. This fuels consumer demand for products. Trip.com Group Limited (NASDAQ:TCOM) should be supported by optimization of business processes, healthy strategic partnerships and digital initiatives. Furthermore, stable labor market, healthy consumer spending and growing disposable income are expected to act as growth enablers.
At the end of Q1 2024, 49 hedge funds tracked by Insider Monkey reported having stakes in Trip.com Group Limited (NASDAQ:TCOM).
9) Delta Air Lines, Inc. (NYSE:DAL)
Number of Hedge Fund Holders: 51
Delta Air Lines, Inc. (NYSE:DAL) is one of the world’s leading airlines, having a network of more than 300 destinations in over 50 countries.
The company released its financial results for the June quarter, in which its operating revenues were $16.7 billion and operating income was $2.3 billion. Even though the company’s revenues surpassed expectations, its statutory earnings fell short of analysts’ expectations by ~16%. For its September quarter, the company expects capacity growth of 5% – 6% and revenue growth of 2% – 4%, with sequential improvement in unit revenue trends through the quarter.
The company focuses on debt reduction and it continues to progress towards investment grade ratings. Notably, its gross leverage improved to 2.8x at the end of H1.
Analysts at HSBC initiated coverage on Delta Air Lines, Inc. (NYSE:DAL) on 13th May. They gave a “Buy” rating on the stock and a price objective of $72.80. It is being believed that its strong network and competitive edge at the key hubs remain as central factors for the positive outlook. The company’s strategic focus on premium segment might result in healthy operating margins.
In 1Q 2024, there were 51 hedge funds holding positions in Delta Air Lines, Inc. (NYSE:DAL) as per Insider Monkey database. The total value of these holdings is ~$1.80 million.
Delta Air Lines, Inc. (NYSE:DAL) is ranked 9th on our list of 10 Best Travel and Leisure Stocks to Buy Now. There are several factors that continue to affect aviation industry. Collectively, these are putting pressure on earnings. Higher competition from low-cost carriers impacted the company’s bottom-line as Delta Air Lines, Inc. (NYSE:DAL) had to go for discounted ticket prices.
Oakmark Funds released its first quarter 2024 investor letter, in which it mentioned Delta Air Lines, Inc. (NYSE:DAL). Here is what the company said:
“Delta Air Lines, Inc. (NYSE:DAL) is a leading global airline. Of the big three U.S.-based airlines (Delta, United and American), we see Delta as the most competitively advantaged. We believe the company’s years of industry-leading operational performance and investments in the customer experience have established Delta as the premium brand in the industry. We also think its geographically optimal hubs, high local market share, robust loyalty program and unique corporate culture all support healthy returns on capital. Delta currently trades at 6x our estimate of normalized earnings per share. We believe this is an attractive valuation for a competitively advantaged and growing business in an out-of-favor industry.”
8) Carnival Corporation & plc (NYSE:CCL)
Number of Hedge Fund Holders: 56
Carnival Corporation & plc (NYSE:CCL) manages portfolio of global, regional, and national cruise brands specializing in selling cruise products, services, and vacation experiences.
The company announced financial results for 2Q 2024. Its net income improved by ~$500 million as compared to 2023 and its adjusted net income outperformed March guidance by ~$170 million. The company improved its commercial operations, and strategically reallocated its portfolio composition.
Carnival Corporation & plc (NYSE:CCL) is seeing strong demand trends. As a result, the company’s net yields are now forecasted to top 10% and it continues to march towards double-digit returns on invested capital. For FY 2024, the company expects adjusted EBITDA of ~$5.83 billion, up ~40% as compared to 2023 and adjusted net income of ~$1.55 billion.
Carnival Corporation & plc (NYSE:CCL) currently trades at a P/E multiple of ~25.6x. What’s holding this stock? It’s a substantial increase in the company’s debt. The company had to take more debt to finance its operations during the COVID-19 pandemic. That being said, its debt should continue to come down considering the growth in its revenue and operating profits. Operating income saw the jump to $560 million in 2Q 2024, up ~5x over the same quarter in 2023. This was supported by favourable trends in pricing, demand, and operational costs.
As per Insider Monkey’s 1Q 2024 database, 56 hedge funds reported owning stakes in Carnival Corporation & plc (NYSE:CCL). These were valued at ~$1.49 million.
7) Airbnb, Inc. (NASDAQ:ABNB)
Number of Hedge Fund Holders: 56
Airbnb, Inc. (NASDAQ:ABNB) operates as a global online marketplace for lodging and tourism experiences.
The company has now become profitable. This means that its prior investments are now paying off. It goes without saying that shareholders have been benefitted as the business was a loss-making one few years ago, but it is now making 16% on its capital. This means that Airbnb, Inc. (NASDAQ:ABNB) has profitable reinvestment opportunities, and if this momentum continues going forward that can result in a multi-bagger performance.
Post handling ~140 million bookings 6 years ago, the company continues to target over 500 million nights and experiences booked in 2024, on the basis of the fact that it saw 132.6 million nights and experiences booked in 1Q 2024. This implies 9.5% rise from 121.1 million for the same period of the previous year.
Another point which makes a buying case for the company is the fact that there’s a significant opportunity for expansion in number of platform hosts over upcoming years. This is evident because its marketplace only has 5 million hosts, who have welcomed more than 1.5 billion guest arrivals.
Analysts at Tigress Financial initiated the coverage on Airbnb, Inc. (NASDAQ:ABNB), and increased their price target on the shares of Airbnb, Inc. (NASDAQ:ABNB) from $185.00 to $195.00. They gave the company a “Buy” rating on 5th April.
Polen Capital, an investment management company, released its first-quarter 2024 investor letter. It gave its views regarding Airbnb, Inc. (NASDAQ:ABNB). Here is what it said:
“During the quarter, we initiated new positions in Sage Group and Airbnb, Inc. (NASDAQ:ABNB) and added to our existing position in Globant.
Airbnb is a great business model, according to our research, due to its two-sided global network effects. For several reasons, Airbnb has a better mousetrap with its supply growth engine, with its hosts having a far lower cost of capital and more flexibility than hotels. We think private rentals should continue to grow their share of overall accommodation stays, potentially up to 30% of lodging or higher over the long term, letting the private rental gross booking value grow at a low double-digit rate. We also think Airbnb should continue to gain share within the private rental market as its global network effects strengthen, allowing for mid-teens revenue growth. With flat to rising margins over time, significant free cash flow generation, and a management team that has demonstrated its owner orientation, this should result in high-teens EPS growth over time. While the path there will not be linear, and it is a more discretionary spending-tied business, we think the long-term secular growth opportunity is very compelling.”
6) Royal Caribbean Cruises Ltd. (NYSE:RCL)
Number of Hedge Fund Holders: 56
Royal Caribbean Cruises Ltd. (NYSE:RCL) is the world’s second-largest cruise company, which operates ~63 ships throughout 5 global and partner brands in the cruise vacation industry.
The company reported its first quarter results, with its earnings per share (EPS) and adjusted EPS coming at $1.35 of $1.77, respectively. Stronger pricing on close-in demand, strength in onboard revenue along with favorable timing of expenses all supported the company’s 1Q 2024 results.
Royal Caribbean Cruises Ltd. (NYSE:RCL) is one of the stocks which should benefit from the rate cut by the US Fed. It has ~$20.2 billion of debt as at March 2024, which reflects a decline from $21.1 billion in the prior year. Because of its cash reserve balance of US$437.0 million, its net debt is less, coming at ~$19.7 billion. Its liabilities, which are due within 12 months, came at $9.91 billion. However, liabilities of US$20.0 billion are due beyond 12 months.
However, the company became profitable in its last quarter. This provided some sigh of relief to the investors. In 1Q 2024, its net income was $360 million or $1.35 per share as compared to net loss of $(48) million or $(0.19) per share in same period of the previous year.
Adjusted EPS might grow 60% YoY to $10.70 - $10.90. The increase in earnings consists of a $0.10 headwind associated with stronger dollar and increased fuel prices. However, ~1/3rd of this increase is attributable to 1Q 2024 performance with the remainder mainly aided by better business outlook and expectation of reduced interest expense.
In 1Q 2024, there were 56 hedge funds holding positions in Royal Caribbean Cruises Ltd. (NYSE:RCL).
Diamond Hill Capital, an investment manager, published its first-quarter 2024 investor letter. Here is what the company said:
“As valuations have risen, it has become increasingly challenging to find high-quality companies trading at interesting valuations. Accordingly, we didn’t initiate any new long positions during the quarter. However, we did introduce three new short positions, including Powell Industries, Royal Caribbean Cruises Ltd. (NYSE:RCL) and YETI Holdings.
Royal Caribbean Group (RCL) is the second largest player in a cruise industry in which size and scale matter. While the company has benefited from strong demand since the pandemic’s end, we believe the valuation has outpaced the fundamentals and find the risk/reward on the short side attractive.”
5) Marriott International, Inc. (NASDAQ:MAR)
Number of Hedge Fund Holders: 58
Marriott International, Inc. (NASDAQ:MAR) is a worldwide operator, franchisor, and licensor of hotel, residential, timeshare, and other lodging properties under several brand names at different price and service points.
The company released its 1Q 2024 financial results, with reported net income totalling $564 million as compared to reported net income of $757 million in the year-ago quarter. The adjusted EBITDA of the company totalled $1,142 million in 1Q 2024 as compared to 1Q 2023 adjusted EBITDA of $1,098 million. The quarter exhibits the company’s strong revenue-generating capabilities and highlights the period of recovery, primarily in international markets.
Analysts at BMO Capital Markets initiated the coverage on Marriott International, Inc. (NASDAQ:MAR) and increased their price target on the company’s shares from $235.00 to $240.00. The company gave a “Market perform” rating on May 2nd. Apart from this, Susquehanna covered the company’s shares in a report on 21st June. They gave a “neutral” rating, with the price objective of $255.00.
The company plans on expanding global footprint and enhancing its digital engagement via Marriott Bonvoy app, targeted at streamlining customer experience along with fostering loyalty.
By the end of 1Q 2024, 58 hedge funds reported owning stakes in the Marriott International, Inc. (NASDAQ:MAR) as per Insider Monkey’s database.
4) Hilton Worldwide Holdings Inc. (NYSE:HLT)
Number of Hedge Fund Holders: 61
Hilton Worldwide Holdings Inc. (NYSE:HLT) is the global hospitality company, which focuses on managing, franchising, owning and leasing hotels and resorts. The company licenses its intellectual property, which includes brand names, trademarks and service marks.
The company is expected to benefit from various digital initiatives, efforts focusing on unit expansion and strategic partnerships and acquisitions. Apart from this, emphasis on luxury and lifestyle properties should bode well. Hilton Worldwide Holdings Inc. (NYSE:HLT) leverages technology to offer personalized experiences for guests. It made significant strides in its development plans, as it opened over 100 hotels. As a result, the total now comes out to be ~17,000 rooms in 1Q 2024.
Hilton Worldwide Holdings Inc. (NYSE:HLT) expects system-wide RevPAR growth in the range of 2% – 4% for remainder of 2024. This is expected to be supported by strong performance in international markets.
Insider Monkey saw that 61 hedge funds out of the 920 hedge funds held stakes in Hilton Worldwide Holdings Inc. (NYSE:HLT) as of the end of 1Q 2024. Strategic brand expansions, healthy development pipeline and innovative technology integration are expected to act as growth enablers.
That being said, the company’s valuation can be a concern for some investors. It trades at premium with a NTM P/E ratio of ~27.86x as against the sectoral average of ~21.7x. These numbers indicate somewhat stretched valuations. However, it expects to return ~$3 billion to shareholders in the form of buybacks and dividends. This enhances the confidence of investors in its financial health.
Baron Funds, an investment management company, released its first quarter 2024 investor letter. In this, it mentioned about Hilton Worldwide Holdings Inc. (NYSE:HLT). Here is what the fund said:
“We recently acquired additional shares of Hilton Worldwide Holdings Inc. (NYSE:HLT). Hilton is the second largest hotel company in the world with 7,500 properties, 1.2 million rooms, 22 unique brands, and 180 million loyalty members in its database. Hilton has a superior executive team led by long-time CEO Chris Nassetta (over 16 years as CEO).
In March, we attended Hilton’s Investor Day in Washington, D.C. and also spent time with Chris in advance. Our main takeaway from the Investor Day presentations, besides being able to meet with a deeper and impressive layer of the management organization, is that Hilton’s growth prospects over the next five years are superior to the prior five due to: i) accelerating unit growth driven by new and existing brands; ii) several brand ‘seedlings’ planted with significant white space for growth (e.g., Graduate Hotels, SLH, LivSmart); and iii) Hilton’s better ability to capture the brand ‘conversion’ opportunity irrespective of new hotel construction/development…” (Click here to read the full text)
3) Expedia Group, Inc. (NASDAQ:EXPE)
Number of Hedge Fund Holders: 62
Expedia Group, Inc. (NASDAQ:EXPE) is an online travel company, which carries out operations through segments such as B2C, B2B, and trivago.
While releasing its financial results for 1Q 2024, it reported total gross bookings of $30.2 billion, exhibiting a rise of 3% as compared to 2023. Its revenue of $2.9 billion went up by 8% as compared to 2023. B2B revenue came in at $833 million, reflecting an increase of 25% as compared to 2023.
Piper Sandler covered the shares of Expedia Group, Inc. (NASDAQ:EXPE), and downgraded its rating from “Overweight” to “Neutral.” The company also decided to cut its target price from $175.00 to $145.00 on 3rd May. This can be because of not-so-strong 1Q 2024 results. The company saw less robust gross bookings. Vrbo’s recovery after re-platforming was slower than anticipated, which impacted its gross bookings.
However, some experts believe that it is all set to soar from the current levels. The company transitioned to unified platform over previous few years. Expedia Group, Inc. (NASDAQ:EXPE) continues to grow its presence internationally too. The company plans to make use of vast spending data which it collects to build out new media network. Given momentum in the ad spending in the last year, the company might see supplemental revenue streams. As a result, the company might see growth in emerging markets such as China and in vacation rental market.
The average price target for the company is $142.29. This is based on 25 Wall Street analysts’ 12-month price objectives, which were issued in previous 3 months.
62 hedge funds made investments in this company, as per Insider Monkey’s Q1 database.
Brown Capital Management released its first quarter 2024 investor letter. The company mentioned about Expedia Group, Inc. (NASDAQ:EXPE). Here is what it said:
“Expedia Group, Inc. (NASDAQ:EXPE) is the largest online travel agency (OTA) in the U.S., offering a wide range of travel products, including flights, hotels, car rentals, cruises and vacation packages. Our original thesis was that increasing online travel penetration would provide solid growth and that significant margin expansion could be achievable. Since we first invested in Expedia eight years ago, there has indeed been a significant shift in travel spending toward online platforms, with penetration rates expanding considerably. While this aligns with our early expectations, the market for online travel is now much more penetrated, providing less opportunity for future growth. In addition, Expedia has been unable to meaningfully narrow the margin gap with its closest competitor, Booking Holdings, due to inconsistent execution and an unwieldy proliferation of brands within the company’s portfolio. Given the company’s more mature market position and its lagging margin performance, we decided to sell Expedia out of the Fund.”
2) Booking Holdings Inc. (NASDAQ:BKNG)
Number of Hedge Fund Holders: 97
Booking Holdings Inc. (NASDAQ:BKNG) has been categorised as world’s largest online travel agency in terms of revenue. The company offers booking services for hotel and alternative accommodation rooms, airline tickets, rental cars, and other vacation packages.
Analyst Daniel Kurnos covered the company’s shares and upgraded them to “Buy” from “Hold.” The analyst has a price target of $4,700. Analyst believes that its growth internationally builds up confidence that it might surpass Wall Street estimates in the upcoming 18 months and beyond. It can also continue to increase its market share, furthering improving its presence in North America.
The bullish thesis for the stock is being supported by the fact that travel industry is all set to see passenger volumes reach record levels by the end of 2024. Booking Holdings Inc. (NASDAQ:BKNG) has strong catalysts in its favor, apart from its healthy fundamentals. It continues to see a period of rapid growth. The company’s revenues nearly doubled between 2021 and 2023 and it increased its overall profitability too.
The number of hedge funds in Insider Monkey’s database owning stakes in Booking Holdings Inc. (NASDAQ:BKNG) stand at 97 in Q1 2024. The consolidated value of such stakes is ~$7.90 million.
Wedgewood Partners, an investment management company, released first quarter 2024 investor letter and mentioned about Booking Holdings Inc. (NASDAQ:BKNG). Here is what the company said:
“Booking Holdings Inc. (NASDAQ:BKNG) contributed negatively to relative performance. The Company grew bookings on their platforms +16% and reported +22% growth in adjusted operating income during their fourth quarter of 2023. We think the market is cautious about the Company’s results for 2024 because they will be lapping very high levels of growth compared to those in 2023 (full year 2023 bookings growth +24%). However, Booking’s end markets continue to be quite healthy, outside of geographies affected by war because consumers still have plenty of wallet share to re-dedicate to travel compared to pre-COVID-19 numbers. We applaud the Company as they aggressively repurchase shares at valuation levels well below the market and peers. This should serve to compound our ownership in Booking’s business, which has exceptional profitability.”
1) Uber Technologies, Inc. (NYSE:UBER)
Number of Hedge Fund Holders: 130
Uber Technologies, Inc. (NYSE:UBER) is a technology provider, matching riders with drivers, hungry people with restaurants and food delivery service providers and shippers with carriers.
The company’s stock was recently covered by numerous research analysts. DA Davidson initiated the coverage on shares of Uber Technologies, Inc. (NYSE:UBER) and reaffirmed “Buy” rating. The brokerage gave a $81.00 price objective on the company’s shares on 8th May. Piper Sandler increased their price target on Uber Technologies, Inc. (NYSE:UBER) from $86.00 to $88.00, giving the stock “Overweight” rating on 25th June.
The company announced financial results for the quarter ended March 31, 2024. Its gross bookings went up by ~20% YoY to $37.7 billion, or 21% on the constant currency basis. Mobility Gross Bookings came in at $18.7 Bn, reflecting 25% growth YoY or 26% growth on constant currency basis.
Uber Technologies, Inc. (NYSE:UBER) has recently been in the news after reports surfaced that Tesla, Inc. (NASDAQ:TSLA) pushed back its big robotaxi event. Mr. Musk announced that it plans to postpone a planned event from August to October.
Plans for potential autonomous robotaxi service from Tesla, Inc. (NASDAQ:TSLA) have impacted share prices of Uber Technologies, Inc. (NYSE:UBER) and Lyft, Inc. (NASDAQ:LYFT) since April 2024.
At the end of 1Q 2024, 130 hedge funds tracked by Insider Monkey reported having stakes in Uber Technologies, Inc. (NYSE:UBER). These stakes have a consolidated value of ~$10.18 million.
RiverPark Advisors, an investment advisory firm, released its 1Q 2024 investor letter and mentioned about Uber Technologies, Inc. (NYSE:UBER). Here is what the company said:
“Uber Technologies, Inc. (NYSE:UBER): UBER was a top contributor in the quarter following better than expected 4Q23 earnings and 1Q24 guidance. Gross bookings of $37.6 billion were up 22% year over year. Mobility gross bookings of $19.3 billion grew 29% over last year driven by a combination of product innovation and driver availability. Delivery gross bookings of $17 billion were up 19% from last year and continued to be strong throughout the quarter. 4Q Adjusted EBITDA of $1.3 billion, up $618 million year over year, was better than management’s guidance of $1.2 billion, and the company generated $768 million of free cash flow, up from a cash loss of $303 million last year. Management guided to continuing growth in 1Q Gross Bookings (20% growth) and Adjusted EBITDA (of $1.3 billion). The company hosted a well-received analyst day in February during which it guided to three year compounded annual growth rates for gross bookings of mid-to-high single digits and EBITDA of 30-40%, both above investor expectations. The company also guided to free cash flow conversion of 90% of EBITDA.
UBER remains the undisputed global leader in ride sharing, with a greater than 50% share in every major region in which it operates. The company is also a leader in food delivery, where it is number one or two in the more than 25 countries in which it operates. Moreover, after a history of losses, the company is now profitable, delivering expanding margins and substantial free cash flow. We view UBER as more than a ride sharing and food delivery service; we also see it as a global mobility platform with 142 million users (by comparison, Amazon Prime has 200 million members) and the ability to penetrate new markets of on-demand services, such as package and grocery delivery, travel, and hourly worker staffing. Given its $5.4 billion of unrestricted cash and $4.8 billion of investments, the company today has an enterprise value of $165 billion, indicating that UBER trades at 21x our estimates of next year’s free cash flow.”
While we acknowledge the potential of Uber Technologies, Inc. (NYSE:UBER) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.
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