The continuing spread of the highly transmissible COVID-19 omicron variant motivated the Biden administration to implement travel limits on visitors to the U.S. There have been significant flight cancellations as well. However, the pent-up demand for travel and the less harmful nature of omicron will likely lead to an easing of travel restrictions in the near term.
Companies that offer services such as travel bookings, price comparison, and online tourism advice have witnessed significant web traffic growth. Also, investors are betting on the travel industry’s rebound later this year. This is evidenced by the SonicShares Airlines, Hotels, Cruise Lines ETF’s (TRYP) 11.9% gains versus the SPDR S&P 500 Trust ETF’s (SPY) 0.3% returns over the past month.
Given this backdrop, analysts recently upgraded the ratings of travel stocks Expedia Group, Inc. (EXPE), Hyatt Hotels Corporation (H), Pebblebrook Hotel Trust (PEB), and Hersha Hospitality Trust (HT). Therefore, we think these stocks could be solid additions to one’s watchlist.
Expedia Group, Inc. (EXPE)
EXPE in Bellevue, Wash., is an international online travel company that operates through Retail; B2B; and trivago segments. The company offers a wide range of travel shopping and reservation services, advertising, and media services and provides real-time access to schedule, pricing, and availability information for airlines, hotels, and car rental companies. Piper Sandler has upgraded EXPE’s rating from ‘Neutral’ to ‘Overweight.’
EXPE’s revenue for its fiscal 2021 third quarter, ended Sept. 30, 2021, increased 96.9% year-over-year to $2.96 billion. The company’s operating income came in at $524 million, versus a $113 million loss in the prior-year period. Its adjusted net income was $553 million for the quarter, compared to a $31 million loss in the year-ago period. Its adjusted EPS was $3.53 versus a $0.22 loss per share in the prior-year period. And the company had $5.03 billion in cash and cash equivalents as of Sept. 30, 2021.
Analysts expect the company’s EPS to increase 109% year-over-year to $0.79 in its fiscal year 2021, ended Dec. 31, 2021. The $8.63 billion consensus revenue estimate for the same fiscal year represents a 65.9% rise from the prior-year period. EXPE’s EPS is expected to grow at a 22.8% rate per annum over the next five years.
The stock has gained 27.9% in price over the past year and 16.5% over the past month. It closed Friday’s trading session at $184.40.
Hyatt Hotels Corporation (H)
Chicago-based H is an international hospitality company that operates through Owned and Leased Hotels; Americas Management and Franchising; ASPAC Management and Franchising; and EAME/SW Asia Management and Franchising segments. The company serves primarily corporations, national, state, and regional associations, specialty market accounts, travel agencies and luxury organizations, and individual consumers. Analysts at BofA Securities upgraded H’s rating from ‘Underperform’ to ‘Buy.’
On Jan. 13, 2022, H and Keyestone Group, a Hong Kong-based conglomerate focused on developing and managing high-quality premier projects in China, announced plans to open China’s first Hello Kitty Hotel in Sanya, Hainan. The hotel will feature 221 rooms and villas adorned with Hello Kitty and other Sanrio character designs and provide an exciting range of world-class amenities. Expected to open by 2025, the hotel will be added to the Joie de Vivre Hospitality (JdV) company, H’s collection of boutique hotels.
H’s total revenues for its fiscal 2021 third quarter, ended Sept. 30, 2021, increased 113.3% year-over-year to $851 million. The company’s pre-tax income came in at $258 million, versus a $220 million loss in the prior-year period. H’s adjusted net income came in at $241 million for the quarter, compared to a $150 million loss in the year-ago period. And its adjusted EPS was $2.31, versus a $1.48 loss per share in the prior-year period. The company had $2.42 billion in cash and cash equivalents as of Sept. 30, 2021.
The $3.16 billion consensus revenue estimate for its fiscal 2021, ending Dec. 31, 2021, represents a 52.8% rise from the prior-year period. H’s EPS is expected to grow at a rate of 60.6% per annum over the next five years.
The stock has gained 26.8% in price over the past year and 10.5% over the past month. It ended Friday’s trading session at $92.19.
Pebblebrook Hotel Trust (PEB)
As a real estate investment trust (REIT), Bethesda, Md.-based PEB is an internally managed hotel investment company that acquires and invests in hotel properties located in large U.S. cities, with an emphasis on major coastal markets. Raymond James upgraded PEB’s rating from ‘Market Perform’ to ‘Outperform.’
On Jan. 12, 2022, PEB acquired the AAA Four Diamond 210-room Estancia La Jolla Hotel & Spa in La Jolla, California, for $108 million. The resort will also become part of PEB’s Curator Hotel & Resort Collection, which is expected to reduce various expenses and enhance the resort’s technology and operating initiatives. This acquisition brings the total number of properties in the company’s portfolio to 53 independent lifestyle resorts.
PEB’s total revenues for its fiscal 2021 third quarter, ended September 30, 2021, increased 210.2% year-over-year to $238.81 million. The company had $157.55 million in cash and equivalents as of Sept. 30, 2021.
Analysts expect the company’s revenue to be $715.65 million for its fiscal year 2021, ended Dec. 31, 2021, representing a 61.6% rise from the prior-year period. PEB’s EPS is expected to grow at a 9% per annum rate over the next five years.
The stock has gained 14.9% in price over the past year and 14.2% over the past month. It closed Friday’s trading session at $23.96.
Hersha Hospitality Trust (HT)
HT is a self-advised real estate investment trust (REIT) in the hospitality sector, which owns and operates high-quality upscale and lifestyle hotels in urban gateway markets and resort destinations. Raymond James has upgraded HT’s rating from ‘Underperform’ to ‘Market Perform.’ HT is headquartered in New Cumberland, Pa.
HT’s total revenues for its fiscal 2021 second quarter, ended Sept. 30, 2021, increased 152.6% year-over-year to $85.25 million. The company’s adjusted EBITDA came in at $22.82 million, versus a $8.57 million loss in the prior-year period. It had $71.24 million in cash and cash equivalents as of Sept. 30, 2021.
The $289.64 million consensus revenue estimate for the fiscal year 2021, ended December 31, 2021, represents a 64% rise from the prior-year period. It surpassed the Street’s EPS estimates in three of the trailing four quarters. The company’s EPS is expected to grow at a 27.8% rate per annum over the next five years.
The stock has gained 13.2% in price over the past year and 8.8% over the past month. It closed Friday’s trading session at $9.52.
EXPE shares were trading at $182.00 per share on Tuesday morning, down $2.40 (-1.30%). Year-to-date, EXPE has gained 0.71%, versus a -3.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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