We recently compiled a list of the 13 Best Vacation Stocks to Buy Now. In this article, we are going to take a look at where Red Rock Resorts, Inc. (NASDAQ:RRR) stands against the other vacation stocks.
In early 2024, The World Travel & Tourism Council projected a strong year for travel & tourism, with the sector’s global economic contribution expected to touch an all-time high of $11.1 trillion. As per the global tourism body’s 2024 Economic Impact Research (EIR), travel & tourism should be able to contribute an additional $770 billion over its previous record. WTTC anticipates that ~142 countries, of the 185 analysed, are expected to outperform previous national records.
WTTC forecasts a strong future for the next decade, characterized by healthy growth and unmatched career opportunities. By 2034, the sector is expected to supercharge the global economy with a staggering $16 trillion, accounting for ~11.4% of the entire economic landscape.
Travel and Vacationing in 2024 and Beyond
In 2024, the travel sector continues to break boundaries. Mastercard Economics Institute expects that this momentum will continue, with consumers prioritizing meaningful experiences and earmarking more of their budgets to travel.
Apart from air travel, cruise vacationing saw extraordinary growth, outpacing 2019 records. Through 1Q 2024, the US travel story was characterized by contrasting outbound and inbound dynamics. By November 2022, the US travelers vacationing overseas (excluding Canada and Mexico) outpaced 2019 levels. As of March 2024, the US travel overseas stood at ~20% above that level.
In comparison, the visitor traffic arrivals in the US from abroad were ~6% below 2019 levels as of March 2024. At this pace, the Economics Institute estimated that foreign passenger traffic in the US is expected to surpass 2019 levels later in 2024.
As per the Conference Board survey of consumer attitudes and buying plans in the US, the data as of April 2024 demonstrates that around 1 in 5 of the survey respondents expect to travel internationally in the upcoming 6 months. This was the record high since the survey began in February 1967. During this similar time in 2020, only 1 in every 20 Americans wanted to travel.
Recent Trends in Vacations
A big trend for 2024 remains the preference for experiential traveling over traditional celebrations for achieving some milestones. A recent survey demonstrated that ~40% of respondents continue to plan vacations for celebrating milestone occasions in 2024. One major shift in travel trends is the concept of a journey as the final destination. While travelers are seeking rail journeys along with epic boat trips, some travelers are opting for extended stopovers in certain destinations. This helps in turning layovers into small vacations.
The Cruise Lines International Association expects that ~82% of those who have cruised are expected to cruise again. The vacation rental market has been pegged at US$99.6 billion in 2023 and should be able to compound at more than 3% between 2024 and 2032 (as per Global Market Insights). This is expected on the back of elevated demand from the younger generation as they seek unique and authentic travel experiences. Notably, millennials and Gen Z are prioritizing experiences rather than material possessions, resulting in an increased demand for engaging and authentic travel.
Therefore, growth in the vacation rental market should stem from the increased use of online booking platforms, advancements in AI-driven property management technology, and the adoption of remote working.
Our methodology
To list the 13 Best Vacation Stocks to Buy Now, we used the Finviz screener to compile a list of 20 stocks catering to relevant industries. We then ranked the stocks in ascending order of their hedge fund sentiment, as of Q2 2024, and chose the following 13 companies.
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).
A picturesque sunset view of the Graton Resort & Casino, with patrons gambling in the background.
Red Rock Resorts, Inc. (NASDAQ:RRR)
Number of Hedge Fund Holders: 17
Red Rock Resorts, Inc. (NASDAQ:RRR), along with its subsidiary, is a gaming, development, and management company. It develops strategically located casino and entertainment properties.
The company’s Durango casino should continue to add to its growth prospects. This casino continues to generate strong results which should enable Red Rock Resorts, Inc. (NASDAQ:RRR) to meet its expected 20% ROIC, pay down its debt, and return to its targeted leverage ratio of 3x by next year’s end.
Market experts opine that its new casino, together with strong market growth, should help the company generate high single-digit growth in EBITDA and double-digit FCF growth in upcoming years. With expectations of strong margins on revenues from its new resort, the company’s margins are expected to remain above the pre-COVID levels.
Red Rock Resorts, Inc. (NASDAQ:RRR) continues to eye expansion opportunities and remains confident in its long-term growth strategy, which is expected to be supported by its real estate bank and robust assets in the Las Vegas locals market. Its growth strategy revolves around doubling of portfolio size. While 55,000 new customers signed up at Durango (which indicates market growth), Durango 2.0 expansion should be revenue additive. Red Rock Resorts, Inc. (NASDAQ:RRR) should be able to capitalize on favorable demographic trends and sustain its healthy market position in the competitive Las Vegas gaming and hospitality industry.
Analysts at Susquehanna upped their price objective on the shares of Red Rock Resorts, Inc. (NASDAQ:RRR) from $63.00 to $70.00, giving it a “Positive” rating on 24th July.
Diamond Hill Capital, an investment management company, released its second-quarter 2024 investor letter and mentioned Red Rock Resorts, Inc. (NASDAQ:RRR). Here is what the fund said:
“Among our bottom Q2 contributors were Red Rock Resorts, Inc. (NASDAQ:RRR) and Enovis Corporation. Red Rock Resorts, a casino operator controlling over half the Las Vegas locals market, is facing some concerns about the near-term competitive environment. However, we maintain our conviction in the business’s long-term underlying fundamentals and anticipate it will actually take market share.”
Overall RRR ranks 11th on our list of the best vacation stocks to buy. While we acknowledge the potential of RRR as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than RRR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.