The travel industry experienced a steady rebound in performance throughout 2022 amid the easing of pandemic-related restrictions and the vaccine rollout. Continued pent-up demand and travelers’ desire to make up for missed travel opportunities aided essentially in restoring the leisure travel sector close to pre-pandemic levels.
Moreover, the demand for business travel, particularly for meetings and events, further helped to boost the growth. Based on the latest data by the United Nations World Tourism Organisation (UNWTO), more than 900 million tourists traveled internationally last year, nearly double the number reported in 2021 and 63% of pre-pandemic levels.
Despite ongoing headwinds, including economic concerns and continued geopolitical uncertainty, travel industry growth is expected to remain robust this year. Based on UNWTO’s forecast for 2023, international tourist arrivals could reach 80% to 95% of pre-pandemic levels this year.
Also, China’s reopening of the economy with the recent lifting of COVID-19-related travel restrictions could drive global travel. According to Statista, the travel and tourism market is expected to generate $854.80 billion in revenue in 2023 and grow at a 4.4% CAGR to reach $1.02 trillion by 2027.
Although some companies are profitable enough to attract the capital needed to progress the industry as it decarbonizes, some are still having trouble due to a lack of workers, issues with the supply chain brought on by Russia's invasion of Ukraine, recession fears, and unstable global economies.
Given this backdrop, quality travel stocks Playa Hotels & Resorts N.V. (PLYA) and Bluegreen Vacations Holding Corporation (BVH) could be ideal investments this week. However, avoiding the fundamentally weak travel stock Carnival Corporation & plc (CCL) could be wise amid ongoing macroeconomic challenges.
Stocks to Buy:
Playa Hotels & Resorts N.V. (PLYA)
PLYA owns, develops, and manages prime beachfront resorts in Mexico and the Caribbean. It owns a portfolio of 23 resorts with 8,595 rooms in Mexico, Jamaica, and the Dominican Republic.
On December 19, 2022, PLYA expanded its Jewel Resorts brand by adding two Jewel Resorts in the Dominican Republic. Given the success of the Jewel brand in Jamaica and its appeal to mid-level luxury customers, the additions seem a logical expansion. It could allow PLYA to expand its business and boost its revenue stream.
PLYA’s trailing-12-month gross profit margin of 46.48% is 31.3% higher than the 35.41% industry average. Likewise, the stock’s trailing-12-month net income of 8.77% is 70.6% higher than the industry average of 5.14%.
For the third quarter that ended September 30, 2022, PLYA’s total revenues grew 35.3% year-over-year to $204.62 million. Its adjusted EBITDA rose 41.2% from the year-ago value to $44.88 million. Also, the company’s adjusted net income and EPS stood at $5.92 million and $0.04 as compared to a loss and loss per share of $13.72 million and $0.09 in the prior year’s quarter, respectively.
The consensus revenue estimate of $890.06 million for the fiscal year ending December 2023 indicates a 7.6% year-over-year improvement. Moreover, the consensus EPS estimate of $0.49 for the ongoing year reflects a 28.8% rise from the prior year. Shares of PLYA have gained 18.5% over the past month to close the last trading session at $7.63.
PLYA’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Value and Quality. In the 22-stock B-rated Travel - Hotels/Resorts industry, it is ranked #4.
Beyond what we stated above, we also have PLYA’s ratings for Growth, Stability, Sentiment, and Momentum. Get all PLYA ratings here.
Bluegreen Vacations Holding Corporation (BVH)
BVH is a vacation ownership company. It markets and sells vacation ownership interests (VOI) and manages resorts in both leisure and urban destinations. It also offers resort management, mortgage, reservation, and construction design. It also provides development services and financing to qualified VOI buyers.
On October 12, 2022, the company announced the acquisition of two buildings in the Streamside at Vail Resort enclave in Vail, Colorado, as well as a 320-room resort and spa in Panama City Beach, Florida. The new additions would allow BVH to meet the needs of its owners while also improving its customers' experiences.
The stock’s trailing-12-month gross profit margin of 87.78% is 147.9% higher than the 35.41% industry average, while its trailing-12-month levered FCF margin of 6.07% is 347.6% higher than the 1.36% industry average. Moreover, BVH’s trailing-12-month net income of 7.71% is 49.9% higher than the 5.14% industry average.
The company’s total revenue grew 16.9% year-over-year to $250.84 million in the fiscal third quarter that ended September 30, 2022, while its EBITDA rose 4.1% from the year-ago value to $45.75 million. Furthermore, the company’s net income and EPS increased by 1.2% and 12.3% from the prior year’s period to $27.65 million and $1.19, respectively.
Analysts expect BVH’s revenue to increase 18.8% year-over-year to $899.70 million for the fiscal year that ended December 2022. The company’s EPS for the same year is expected to rise 20.1% from the previous year to $3.46.
Also, the company’s revenue and EPS for the current fiscal year (ending December 2023) are expected to grow 4.4% and 8.3% year-over-year to $939.24 million and $3.74, respectively. The stock has gained 45.4% over the past six months to close the last trading session at $34.56.
BVH’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
BVH has an A grade for Value and Sentiment and a B for Quality. It has topped the 22-stock Travel - Hotels/Resorts industry.
In addition to the POWR Ratings I’ve just highlighted, you can see BVH ratings for Growth, Stability, and Momentum here.
Stock to Avoid:
Carnival Corporation & plc (CCL)
CCL offers services for leisure travel. It has a fleet of over 90 ships that visit more than 700 ports. The company also runs hotels, lodges, glass-domed railcars, and motor coaches, in addition to providing port destinations. It primarily offers its cruises through travel agents, tour operators, vacation planners, and websites.
CCL’s trailing-12-month gross profit margin of 31.31% is 11.6% lower than the 35.41% industry average. Moreover, its trailing-12-month EBITDA margin and net income of negative 13.73% and negative 50.07% compare to the industry averages of 11.09% and 5.14%, respectively.
For the fourth quarter that ended November 30, 2022, CCL’s operating costs and expenses widened 56.4% year-over-year to $4.98 billion. As of November 30, 2022, the company’s total current assets stood at $7.49 billion compared to $10.13 billion as of November 30, 2021. Also, its current liabilities came in at $10.61 billion compared to $10.41 billion as of November 30, 2021.
Analysts expect CCL to report a loss per share of $0.61 for the fiscal first quarter ending February 2023. Moreover, the company is expected to report a loss per share of $0.08 for the ongoing fiscal year ending November 2023. The stock has plunged 42% in the past year to close the last trading session at $11.80.
CCL’s poor fundamentals are apparent in its POWR Ratings. The stock has an overall rating of D, equating to Sell in our proprietary rating system.
CCL has an F grade for Stability and a D for Sentiment and Quality. Within the F-rated Travel - Cruises industry, it is ranked #2 of 4 stocks.
Click here to see CCL’s ratings for Value, Growth, and Momentum.
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PLYA shares were trading at $7.54 per share on Monday afternoon, down $0.09 (-1.18%). Year-to-date, PLYA has gained 15.47%, versus a 7.12% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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