COVID-19 has altered the business landscape and our way of life over the past several months. Companies from the technology, e-commerce, and pharmaceutical industries that have facilitated a quicker adoption of these changes have significantly benefited. On the other hand, sectors like travel and hospitality have been severely impacted. With people staying inside amid the pandemic, these sectors suffered massive losses. However, with optimism over the COVID-19 vaccine, these businesses are ready to put the worst behind them.
According to a new report by the Eurasia Group, equitable access to COVID-19 vaccines is expected to generate economic benefits of at least $153 billion in 2020–21, and $ 466 billion by 2025, in 10 major economies. Hence, with the economy coming back on track, a rebound in the travel and hospitality industries maybe around the corner.
Airline companies have survived this critical phase on the back of $50 billion in government support. The recent news about positive trials by Pfizer (PFE) and German biotech firm BioNTech (BNTX) spurred optimism over a revival in air travel. This is evident from the U.S. Global Jets ETF’s (JETS) 3.9% gain over the past week. The same applies to the hospitality industry as well. Once travel picks up, hotels and resorts should see patrons coming back.
Marriott International, Inc. (MAR), Southwest Airlines Co. (LUV), and MGM Resorts International (MGM) are three stocks that could be looking at positive times ahead. These companies are fundamentally strong and their stocks could witness plenty of upside going into 2021.
Marriott International, Inc. (MAR)
MAR is a globally recognized hotelier that operates, franchises, and licenses hotel, residential, and timeshare properties worldwide. North American Full-Service, North American Limited-Service, and Asia Pacific segments, are the segments that the company operates through. JW Marriott, St. Regis, The Ritz-Carlton, Ritz-Carlton Reserve, The Luxury Collection, W Hotels, are some of the brands under MAR. The company has nearly 7,400 properties under 30 hotel brands in 135 countries and territories.
MAR launched a #YourDreamDestinationAwaits campaign during the holiday season. As a part of the campaign, 13 of the company’s properties across the Asia Pacific would recreate signature iconic destination elements of its sister properties for domestic travelers throughout November and December. As international travel has taken a major hit, and people are still skeptical to travel, MAR is wooing customers by offering such unique experiences.
MAR’s comparable systemwide constant dollar RevPAR during the third quarter that ended September 2020 dropped 65.9% globally. The EPS for the quarter dropped to $0.31 from $1.16 posted in the prior-year period. The company’s net rooms climbed 3.8% year-over-year.
The consensus revenue estimate for the fourth quarter ending December 2020 is $2.4 billion, signaling a 54.5% year-over-year drop. It is expected to climb 32% in 2021. However, EPS for 2021 is expected to increase 15,522.2%.
MAR ended Friday’s trading session at $135.61, losing 10.5% on a year-to-date basis. During the past six months, the stock has soared 29.4%.
How does MAR stack up for the POWR Ratings?
A for Trade Grade
B for Buy & Hold Grade
B for Industry Rank
B for Overall POWR Rating
The stock is also ranked #7 out of 14 stocks in the Technology – Hardware industry.
Southwest Airlines Co. (LUV)
LUV, is a leading passenger airline that operates in the United States and near-international markets. The company also offers inflight entertainment and connectivity service on its aircraft through WiFi. It also has a Rapid Rewards loyalty program through which it sells points and related services to its business partners. During 2019, the company operated 747 Boeing, 737 aircrafts; and offered services across 101 destinations in 40 states.
LUV is on the verge of ending the social distancing policy in ticketing. On December 2nd, the company announced that it began selling tickets to fill every seat on board its planes, including its middle seats. The airline operator also said that it would notify passengers in advance if their flight had more than 65% of seats booked. LUV has initiated this step to boost its revenues that have suffered due to the pandemic.
During the third quarter that ended September 2020, the company’s operating revenue dropped 68.2% year-over-year to $1.8 billion, impacted by lower passenger demand and bookings, due to the pandemic. Meanwhile, the operating revenue per ASM during the quarter declined 52.7% year-over-year, due to a 38.6 point drop in load factor, and a 23.1% lower passenger revenue yield. LUV posted a loss per share of $1.96 during the quarter from a $1.23 EPS in the same period last year.
Analysts expect revenue for the fourth quarter ending December 2020 to be $2.7 billion, indicating a 62.3% year-over-year decline. Meanwhile, the EPS is likely to grow 103.4% in 2021.
On a year-to-date basis, LUV dropped 11.8% to close Friday’s trading session at $47.59. However, over the past six months, the stock has surged 24.4%.
LUV’s strong fundamentals are reflected in its POWR Ratings. It has a “Buy” rating with an “A” for Trade Grade and “B” in Peer Grade. It is ranked #4 out of 22 stocks in the Airlines industry.
MGM Resorts International (MGM)
MGM is one of the most famous operators of entertainment resorts, integrated casinos, and hotels, in the United States and Macau. The company’s portfolio of properties consisted of 29 hotel and destination gaming offerings. MGM also owns and operates Primm Valley Golf Club, and Fallen Oak golf course. Besides premium gaming customers, the company also caters to business travelers, conventions, and trade associations.
MGM has divested its stake in MGM Growth Properties LLC for $700 million in a move to boost liquidity. This move helped the company to improve its liquidity to approximately $5.9 billion. The company would now have nearly 149 million units, representing a 53% economic ownership in MGP.
During the third quarter, MGM’s net revenues declined 66% year-over-year to $1.1 billion, due to the pandemic-induced weakness. The company’s loss per share during the quarter widened to $1.08 from $0.08 in the same period last year. MGM is committed to delivering on its long-term strategy of positioning BetMGM as a sports betting and iGaming leader. According to Bill Hornbuckle, the company’s CEO, “We saw sequential improvement in all our markets and several of our regional properties delivered quarterly Adjusted Property EBITDAR records.”
Analysts expect revenue for the fourth quarter ending December 2020 to be $1.6 billion, indicating a 50.5% year-over-year decline. However, for 2021, the revenue is expected to grow 73.2% to $9.1 billion. Meanwhile, EPS is expected to rise 33.3% in 2021.
MGM lost 7.7% on a year-to-date to end Friday’s trading session at $30.72. Over the past six months, the stock has gained 44.4%.
MGM’s strong fundamentals are reflected in its POWR Ratings. It has a “Buy” rating with an “A” for Trade Grade and “B” for Buy & Hold Grade. It is ranked #5 out of 22 stocks in the Entertainment – Casinos/Gambling industry.
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MAR shares were trading at $133.58 per share on Monday morning, down $2.03 (-1.50%). Year-to-date, MAR has declined -11.43%, versus a 16.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Namrata Sen Chanda
Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education. More...
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