In this article, we discuss the 5 travel stocks to buy despite recession fears. If you want to read our discussion on the travel industry outlook, go directly to “People Are Still Going to Travel”: 10 Travel Stocks to Buy Despite Recession Fears.
5. Royal Caribbean Cruises Ltd. (NYSE:RCL)
Number of Hedge Fund Holders: 36
Royal Caribbean Cruises Ltd. (NYSE:RCL) is the second biggest cruise line operator in the world, just behind Carnival Corporation & plc (NYSE:CCL).
Royal Caribbean Cruises Ltd. (NYSE:RCL) reported excellent Q2 2022 results as revenue and adjusted EBITDA surpassed consensus estimates. Furthermore, the management’s commentary reassured strong bookings for the quarter. Royal Caribbean Cruises Ltd. (NYSE:RCL) has also resumed giving guidance which reflects management’s anticipation of continuing recovery. The management has made it clear that it will not use the issuance of more shares as a tool to fulfill its funding needs.
On July 29, Daniel Politzer at Wells Fargo gave Royal Caribbean Cruises Ltd. (NYSE:RCL) stock an Overweight rating with a target price of $58. The analyst sees strong demand for leisure travel, but consumers can be expected to be price sensitive in 2023 due to macroeconomic concerns.
Sciencast Management increased its investment in Royal Caribbean Cruises Ltd. (NYSE:RCL) by 517% in Q2 2022.
4. Southwest Airlines Co. (NYSE:LUV)
Number of Hedge Fund Holders: 45
Southwest Airlines Co. (NYSE:LUV) is a San Antonio, Texas-based low-cost carrier.
In late July, Southwest Airlines Co. (NYSE:LUV) announced that it was removing the expiration date from the company’s travel credit points. Previously, the credit used to expire one year after the flight was booked. However, the company had been extending this deadline during the pandemic. This move is expected to act as a great differentiator for Southwest Airlines Co. (NYSE:LUV). On July 29, Helane Becker at Cowen gave Southwest Airlines Co. (NYSE:LUV) stock a target price of $55 with an Outperform rating. The analyst sees an attractive entry point for investors following the recent stock sell-off.
The risk and reward profile for Southwest Airlines Co. (NYSE:LUV) looks attractive at the current level as the company reported a strong Q2 2022. Southwest Airlines Co. (NYSE:LUV) outperformed the revenue and adjusted EPS estimates for the quarter and revealed an “industry-leading” balance sheet. Revenue increased by 67.8% YoY to $6.73 billion and surpassed the consensus forecast of $6.69 billion.
Of the 912 hedge funds in Insider Monkey’s database, Southwest Airlines Co. (NYSE:LUV) was held by 45 funds at the end of Q1 2022.
3. Marriott International, Inc. (NASDAQ:MAR)
Number of Hedge Fund Holders: 52
Marriott International, Inc. (NASDAQ:MAR) is a Bethesda, Maryland-based operator, franchisor, and licensor of lodging services.
The company reported Q2 2022 results on August 2. Marriott International, Inc. (NASDAQ:MAR) outperformed EPS estimates and gave a strong outlook on the demand for travel for the rest of the year. Marriott International, Inc. (NASDAQ:MAR) saw a 69.5% YoY increase in revenue to $5.34 billion and surpassed the analysts’ forecast of $4.96 billion. Meanwhile, the adjusted EPS of $1.80 was 23 cents higher than the consensus estimates. Marriott International, Inc.’s (NASDAQ:MAR) RevPAR rose by 70.6% YoY and hovered above the pre-pandemic Q2 2019 levels.
CEO Anthony Capuano sees no weakness in traveling in Q3 2022. The increased bullishness on the outlook of the travel sector caused Marriott International, Inc. (NASDAQ:MAR) to raise its 2022 adjusted EPS guidance from $6.33 to $6.59. The revised guidance is 10% higher than analysts’ consensus.
As of Q1 2022, 52 funds held a stake in Marriott International, Inc. (NASDAQ:MAR).
2. Airbnb, Inc. (NASDAQ:ABNB)
Number of Hedge Fund Holders: 66
Airbnb, Inc. (NASDAQ:ABNB) is a San Francisco, California-based mobile application and web platform providing lodging for rentals during vacations and other tourism-related activities.
Airbnb, Inc. (NASDAQ:ABNB) reported record-breaking bookings during Q2 2022. The company (NASDAQ:ABNB) recorded an increase of 58% in revenue and closed the quarter with a cash reserve of $9.9 billion. Furthermore, Airbnb, Inc. (NASDAQ:ABNB) posted a YoY increase of 27% in the Gross Book Value. The company has also revealed a share repurchase program of $2 billion in its latest quarterly results.
Following the quarterly results, Bernie McTernan at Needham gave Airbnb, Inc. (NASDAQ:ABNB) stock a Buy rating with a target price of $150 on August 3. The analyst highlighted that the company’s financial position provides room for continued investment to drive growth and allow share repurchases.
ClearBridge Investments also presented its bullish outlook on Airbnb, Inc. (NASDAQ:ABNB) in its Q2 2022 investor letter:
“Airbnb is the leading online platform for alternative accommodations globally. We believe the company is well-positioned to capitalize on the large and growing market for travel and experiences, with the potential for growth in e-travel to be higher post pandemic due to pent-up demand and increased work from anywhere flexibility. Airbnb is highly profitable today, though we see room for further margin expansion ahead. Furthermore, secular underpinnings to growth, a more variable cost structure and strong balance sheet should help the company drive better through-cycle performance as compared to its consumer discretionary peers.”
1. Booking Holdings Inc. (NASDAQ:BKNG)
Number of Hedge Fund Holders: 99
Booking Holdings Inc. (NASDAQ:BKNG) is a Connecticut-based leading traveling aggregator with a presence in over 220 countries through six brands.
During the second quarter of the year, Booking Holdings Inc. (NASDAQ:BKNG) reported a record revenue of $4.30 billion, reflecting an increase of 99% from Q2 2021. Meanwhile, adjusted EPS was posted at $19.08 and surpassed analysts’ forecast of $17.67.
On August 4, Jed Kelly at Oppenheimer gave an Outperform rating on Booking Holdings Inc. (NASDAQ:BKNG) with a price target of $2480. The analyst thinks that the travel aggregator is likely to gain more website traffic as consumers look for cheaper deals in periods of rising inflation.
Following the quarterly results, Stephen Ju at Credit Suisse highlighted that since the start of the pandemic, Q2 2022 was the first quarter in which Booking Holdings Inc. (NASDAQ:BKNG) reported complete growth over the same period in 2019. Booking Holdings Inc.’s (NASDAQ:BKNG) CEO commented that he also anticipates a strong Q3 and Q4 for the company, with efforts being directed to increase the market share.
Here’s what LRT Capital Management said about Booking Holdings Inc. (NASDAQ:BKNG) in its Q2 2022 investor letter:
“Booking Holdings was formerly Priceline.com but has changed its name to reflect that source of most of its revenue: Booking.com. Booking.com is the largest online travel agency (OTA) in the world, connecting travelers and hotels. The company has over 2.3 million properties in 220 countries on its site, along with photos, reviews and details about the amenities offered by each property. The accommodations offered range from hotels, motels, homes & apartments, hostels, and bed & breakfasts. The company occupies a dominant position in the travel booking funnel and collects revenue from hotel reservations booked through its site. Booking.com is particularly strong in Europe, where chain hotels are less dominant and smaller independent hotel rely on it to fill their rooms.
In addition to Booking.com, the company owns agoda.com, priceline.com, rentalcars.com, OpenTable and the KAYAK flight search engine. Hotel bookings account for most of the revenue, but the company also offers car rental reservations, flights, vacation packages, cruises, tours, airport taxis, etc.
The company benefits from economies of scale in its investments in technology, national advertising, and customer loyalty programs. The business also has enormous network effects, as consumers are most likely to use a booking platform with the most properties, broadest availability of reviews and strong customer service. This in turn drives hotels to make their room inventory available on booking.com, which drives most of the reservation traffic for many boutique hotels, thus reinforces the network effect. Of note, is that Booking.com operates two models: the agency model, where the company simply acts as an agent for a hotel and collects a fee, and the merchant model, under which Booking.com buys the room-night from the hotel, but then retains the ability to optimize the pricing on the room.
Also of note is the fact that the acquisition of Booking.com by Priceline.com is amongst the most successful and value creating M&A transactions of all time.”
Yacktman Asset Management was the leading hedge fund investor in Booking Holdings Inc. (NASDAQ:BKNG) during Q2 2022.
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