2023's Boom in Travel Stocks: What Opportunities Await Investors in 2024?

Moomoo News Global wrote a column · Dec 22, 2023 19:55

In 2023, airline stocks like $Delta Air Lines (DAL.US)$ and $United Airlines (UAL.US)$ have shown strong performance, but cruise line stocks like $Royal Caribbean (RCL.US)$ and $Carnival (CCL.US)$ have performed even better, especially after the difficult year of 2022.

2023's Boom in Travel Stocks: What Opportunities Await Investors in 2024?

Strong revenue and profits remain key drivers for travel stocks. According to Jamie Rollo of Morgan Stanley, there should be some growth in revenue per available room expected by 2024 unless there is a downturn in the economy or an unforeseen shock to demand. Moreover, the International Air Transport Association (IATA) has stated that the airline industry will return to profitability in 2023, with further anticipated increases in profit margin the following year.

Strong Demand for Travel

The upcoming mega events like the 2024 Olympics and UEFA EURO are expected to draw in millions of visitors worldwide, resulting in a surge in demand for travel-related services such as flights, accommodation, and transportation. As a result, travel-related companies can anticipate increased revenue during this time.

The high inflation rates prevented many individuals from being able to afford travel expenditure, resulting in a 15% decrease in the number of holidaymakers during the previous tourism year of 2022/2023 compared to 2018/19, as per TDA's analysis. A reduction in inflation rates may lead to an increase in demand for travel in 2024.

What Are Analysts Saying about Travel Stocks?

● Hotels Stocks Favored by Analysts

According to Barclays analyst Brandt Montour, $Caesars Entertainment (CZR.US)$ and $Hilton Grand Vacations (HGV.US)$ are his preferred choices. He says that Caesars has strong free cash flow and is a potentially undervalued deleveraging opportunity. LSEG's consensus analyst price target predicts the possibility of the company's shares increasing by almost 30% within the next year.

Hilton Grand Vacations is an attractive option due to its current valuation and the pending Bluegreen acquisition, making it a favorable investment, Montour said. LSEG's average analyst price target predicts that Hilton Grand's stock could increase by over 16% within the next year.

Morgan Stanley's Jamie Rollo is also positive on the hotel sector. In the US, he recommended Hilton, $Marriott International (MAR.US)$, $Hyatt Hotels (H.US)$ and $Wyndham Hotels & Resorts (WH.US)$.

● Cruise Lines and Airlines Stocks Recommended by Analysts

Montour of Barclays recommends Royal Caribbean and Carnival as they offer value propositions to consumers, which is crucial during budget-conscious times. Both stocks have outperformed the S&P 500 with over 100% increase this year.

Goldman Sachs analyst Catherine O'Brien recommends Delta and United Airlines for investment. Delta's maintenance and loyalty businesses have high margins and less cyclicality, while United is expanding its premium travel business and has improved revenue in the Pacific market. Delta shares have climbed by 25%, while United shares have gained 12% in 2023. The mean price target predicts a possible increase of nearly 30% for Delta and over 40% for United over the next year, according to LSEG.

● Less Optimism in E-platforms for Booking Travel

We think online travel growth slows from here as eventually the 'pent-up' travel demand will get exhausted — particularly as consumers' wallets are increasingly under pressure," Barclays online travel analyst Trevor Young said.