Travel momentum is growing, buy these stocks to ride the wave: Hot picks
Strong travel demand drove a record rally in Airbnb Inc. shares after it delivered its highest-ever full year of profit and issued an optimistic outlook to begin 2023.
The home-sharing company has climbed 21 per cent this week, set for its biggest weekly gain since its 2020 initial public offering. The move has tacked on about US$15 billion to Airbnb’s market value, fueled by a first-quarter revenue forecast that was stronger than analysts anticipated.
Chief Executive Officer Brian Chesky added to that optimism after saying travel bookings are showing a recovery to pre-pandemic levels. The rosier outlook also spurred at least 25 analysts to boost their 12-month price target on the stock since its Feb. 14 earnings, according to data compiled by Bloomberg.
The rebound in travel from the throes of the pandemic hasn’t just boosted Airbnb. Shares of hotel giant Marriott International Inc. touched their highest level since April after reporting earnings on Feb. 14.
“The pent-up demand for travel continues to drive strong results for travel marketplaces such as Airbnb and Uber, as well as traditional hotel chains like Marriott and Hilton,” said Bloomberg Intelligence analyst Mandeep Singh.
Online travel booking service TripAdvisor Inc. also posted better-than-expected quarterly results this week, though an initial bullish stock reaction was tempered by a lackluster outlook for margins in 2023. In Europe, Air France-KLM closed 5.3 per cent higher on Friday after reporting record quarterly revenue and saying it has “turned the page” on the pandemic.
Investors have also been piling into airline stocks as several carriers forecast strong demand for the year despite lingering threats from inflation and a impending recession. A gauge for the group, the S&P Supercomposite Airlines Industry Index, has risen 18 per cent this year.
Cruise stocks have also been surging in 2023 on a recent recovery in bookings, and after three consecutive years of stock declines for big names in the sector like Carnival Corp. and Norwegian Cruise Line Holdings Ltd. Both companies, along with peer Royal Caribbean Cruises Ltd., have each climbed at least 40 per cent so far this year.
To be sure, most travel-related stocks in the U.S., including Airbnb, are down on Friday. They are mirroring a broader decline in U.S. equity benchmarks as Federal Reserve officials in recent days hammered home their resolve to keep raising rates to crush inflation.
“While persistent inflation is a risk to discretionary travel spending, China outbound travel could be another positive catalyst for travel this year,” Bloomberg Intelligence’s Singh said.