The entire stock market is taking a beating from the coronavirus (COVID-19) outbreak, but travel bans and quarantines around the world have ground the travel industry to a halt.
Travel stocks have plummeted to multi-year lows. While some investors see the sell-off as a long-term opportunity to invest at a discount, others see a long road ahead for the global travel industry to recover. For now, stock selection could be critical as many of the top companies in the travel space have challenged balance sheets and essentially zero business for the time being.
Here are nine travel and leisure stocks to buy, sell and hold, according to CFRA.
Booking Holdings Inc (NASDAQ: BKNG) - Hold
Booking is a global online travel company and the owner of popular brands such as Priceline, Kayak and OpenTable.
Analyst Tuna Amobi says there is simply too much uncertainty to buy the stock at this point after it completely withdrew its financial guidance on March 9. Booing relies heavily on travel in Europe and North America, where CFRA expects COVID-19 to have a major impact. On its most recent earnings call, management said COVID-19 had already triggered significant cancellations, reductions in new bookings and pricing pressures in Asia, which represents more than 20% of Booking’s total room nights.
CFRA has a Hold rating and $1,177 price target for BKNG stock.
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Carnival Corp (NYSE: CCL) - Sell
The cruise lines may end up being the epicenter of the COVID-19 shutdown. Not only are cruise lines in the travel business, it's 100% leisure travel. A certain amount of business travel is necessary, and businesses will likely push to return to normal well before leisure travelers do. In addition, a large portion of cruise customers are retirees, an age group most at-risk from COVID-19.
Amobi says Carnival will likely get slammed by costs and lost revenue related to cancellations, travel restrictions and general aversion to leisure travel, especially on a ship with thousands of other travelers.
CFRA has a Sell rating and $12 price target for CCL stock.
Expedia Group Inc (NASDAQ: EXPE) - Hold
Expedia is the top online travel competitor to Booking and owner of brands such as Vrbo, Orbitz and Hotels.com. On Feb. 13, Expedia said the COVID-19 outbreak in Asia would impact its first-quarter EBITDA by up to $40 million. On March 13, the company completely withdrew its financial guidance and said its previous $30 to $40 million estimates were too conservative.
Amobi said investors should expect Expedia’s earnings, cash flow and financial condition to take a pounding. Much like Booking, there’s no way to accurately forecast the company’s near-term outlook, so investors should proceed with caution.
CFRA has a Hold rating and $49 price target for EXPE stock.
Hyatt Hotels Corporation (NYSE: H) - Hold
Hyatt is one of the world’s largest hotel and hospitality companies. Its portfolio is comprised of more than 900 properties and 223,000 rooms in 29 different countries, but 83% of its 2019 revenue came from the U.S.
Like most other travel companies, Hyatt completely withdrew its guidance on March 2. It had previously been calling for 2020 comparable systemwide RevPAR growth of between -0.5% and +1.5% and EBITDA of between $760 million and $780 million. Amobi says COVID-19 will obviously have an extremely negative impact on the hotel business, and things could get ugly for Hyatt until investors see a clear light at the end of the tunnel.
CFRA has a Hold rating and $47 price target for H stock.
Las Vegas Sands Corp. (NYSE: LVS) - Hold
Las Vegas Sands is one of the world’s largest casino companies, operating resorts in the U.S., Macau, China and Singapore. Sands’ U.S. properties are completely shut down due to COVID-19, but the good news for investors is that the U.S. accounts for a relatively small percentage of its total revenue.
In 2019, Sands generated 63% of its revenue in Macau, 22% in Singapore and only about 15% in Las Vegas and Bethlehem, PA. Macau casinos are already opened back up after a 15-day shutdown, but analysts are anticipating March Macau gross gaming revenue could still be down more than 70%, according to analyst estimates.
CFRA has a Hold rating and $43 price target for LVS stock.
Marriott International Inc (NASDAQ: MAR) - Hold
Marriott is the world’s largest hotel and hospitality company and owner of brands such as the Ritz-Carlton, St. Regis and Courtyard. Roughly 80% of the company’s revenue comes from North America. Marriott withdrew its 2020 guidance on March 18 and said COVID-19 was significantly impacting its business across the board. Management said Asia-Pacific RevPAR was down nearly 25% in the months of January and February, while North American RevPAR was up 3.5% in that period.
The silver lining for investors is that as of March 18, the picture in China had improved for Marriott, with only 30 China hotels remaining closed compared to 90 in the month of February.
CFRA has a Hold rating and $75 price target for MAR stock.
MGM Resorts International (NYSE: MGM) - Sell
Of the big three American international casino operators, MGM has the most business concentrated within the U.S. In 2019, 47% of MGM’s revenue came from the Las Vegas Strip, 29% came from other U.S. regional operations and just 24% came from Macau.
From March 13 to March 16, MGM announced temporary closures of all its U.S. properties, essentially dropping more than 75% of its revenue inflow to zero. The closures remain in effect until further notice and will last at least through mid-April in Las Vegas per a statewide order. MGM has said furloughed employees will get two weeks of pay during the closures.
CFRA has a Sell rating and $9 price target for MGM stock.
Norwegian Cruise Line Holdings Ltd (NYSE: NCLH) - Sell
The good news for Norweigian investors is that Amobi recently said he sees relatively limited near-term downside for the stock after its 79.3% sell-off in the past three months.
Norweigan’s most recent commentary suggests the negative impacts of the COVID-19 outbreak will hurt the company’s business through at least the third quarter. Amobi said the company’s plans for between $1 billion and $1.5 billion in 2020 capital returns are likely out the window as it focuses on its balance sheet. In reality, customer fears may have a lasting impact on the cruise industry for years to come.
CFRA has a Sell rating and $9 price target for NCLH stock.
Spirit Airlines Incorporated (NYSE: SAVE) - Buy
Analyst Colin Scarola says it's mostly pointless to forecast financial outlooks for most airline stocks given the uncertainty related to the COVID-19 outbreak. At the same time, that uncertainty makes it extremely difficult to recommend buying any of the “big four” U.S. international airline stocks, no matter how appealing their valuations get relative to normalized earnings.
However, CFRA maintains a Buy rating for Spirit, and Scarola said Spirit was turning the corner financially prior to the outbreak, including reporting positive free cash flow in 2019 for the first time in six years.
In addition to the Buy rating, CFRA has a $48 price target for SAVE stock.
Latest Ratings for CCL
|Mar 2020||Wells Fargo||Downgrades||Overweight||Underweight|
|Mar 2020||SunTrust Robinson Humphrey||Maintains||Hold|
|Mar 2020||Goldman Sachs||Downgrades||Buy||Neutral|
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