Think Concerns About Omicron are Overblown? Then Buy These 2 Travel Services Stocks

: TNL | Travel + Leisure Co. News, Ratings, and Charts

TNL – Early studies of the COVID-19 omicron variant suggest that the new strain could be less severe than earlier strains. Furthermore, vaccine producers Pfizer and BioNTech have given assurances that three doses of their vaccine will “neutralize” the variant. And, in response to omicron’s surge, the U.S. government has imposed stricter testing requirements rather than international travel bans. Thus, we think travel services stocks Travel + Leisure (TNL) and TripAdvisor (TRIP), which have gained significantly over the past few days, could soar higher in price in the near term. Read on.

Nations worldwide are once again dealing with the COVID-19 induced uncertainty as the newly identified omicron variant threatens global public health and the economic recovery. However, early data about the variant coming from South Africa indicate that it may cause less severe symptoms. In addition, preliminary lab studies of the Pfizer Inc. (PFE)/ BioNTech SE (BNTX) vaccine shows that three doses of the vaccine would neutralize its threat.

The new variant has compelled some governments to re-impose travel restrictions. But rather than banning international travel, the U.S. government has decided to impose stricter testing requirements for travelers. Furthermore, the World Travel & Tourism Council (WTTC) has predicted that the U.S.’ travel and tourism sector could grow by 35.6% year-over-year in 2021, with promising prospects for the coming year.

Given this backdrop, we think it might be reasonable to bet on travel services stocks Travel + Leisure Co. (TNL) and TripAdvisor, Inc. (TRIP), given their fundamental strength.

Travel + Leisure Co. (TNL)

TNL in Orlando, Fla., is a hospitality services and product provider worldwide. The company operates in two broad segments–Vacation Ownership, marketing vacation ownership interests (VOIs) to individual customers, and Travel and Membership, delivering vacation exchange brands, and a home-exchange network.

On December 6, the TNL website debuted seven holiday gifts curated for bookable vacation itineraries in locations in the U.S. and abroad. The new offerings should attract more customers.

On November 15, the company priced a private offering of $650 million of senior secured notes due 2029. The company plans to use the proceeds from the transaction and its cash on hand to redeem its outstanding 4.25% secured notes due March 2022.

For its fiscal third quarter, ended September 30, TNL’s net revenues increased 36.6% year-over-year to $839 million. Its operating income improved 190.6% from the prior-year quarter to $186 million. And its net income attributable to TNL shareholders and EPS came in at $101 million and $1.15, respectively, up 152.5% and 144.7%, respectively, from the same period last year.

A $0.96 consensus EPS estimate for the current quarter (ending December 2021) indicates a 200% year-over-year rise. And the $788.14 million consensus revenue estimate for the current  quarter reflects a 22.2% improvement from the prior-year quarter. Also, TNL has an impressive surprise earnings history, as it has topped consensus EPS estimates in three of the trailing four quarters.

The stock has gained 13.1% in price over the past year and 8.6% over the past five days to close yesterday’s trading session at $51.17. The 12-month median price target of $73.17 indicates a 43% potential upside.

TripAdvisor, Inc. (TRIP)

Newton, Mass.-based TRIP is an online travel company that operates under the broad segments of Hotels, Media & Platform; and Experiences & Dining. The company operates the TripAdvisor brand websites and localized versions in different markets and languages. It also manages other travel media brands.

On November 15, TRIP unveiled its immersive audio experience, via Amazon.com, Inc. (AMZN) Alexa, in a partnership with Visit Orlando, the official tourism association for Orlando. The innovative new offering should add substantially to TRIP’s revenue stream.

Earlier in November, the company announced that it had signed a letter of intent to engage in promotional collaboration with French tourism development agency Atout France. The deal includes a targeted €2 million ($2.25 million) exposure and media investment on the TRIP platform and is expected to attract international travelers.

TRIP’s revenue increased 100.7% year-over-year to $303 million in its  fiscal third quarter, ended September 30. Its total adjusted EBITDA rose 380% from the same period last year to $72 million. Its non-GAAP net income and non-GAAP EPS stood at $23 million and $0.16, respectively, up substantially from their negative year-ago values.

Analysts expect TRIP’s EPS to increase 124.4% year-over-year to $0.10 in the current quarter (ending December 2021). The Street’s $253.64 million revenue estimate for the current quarter reflects an 118.7% improvement  from the same period last year.

TRIP’s shares have gained 7.3% over the past five days to close yesterday’s trading session at $26.88. The 12-month median price target of $38.69 indicates a 43.9% potential upside.


TNL shares were trading at $52.45 per share on Wednesday afternoon, up $1.28 (+2.50%). Year-to-date, TNL has gained 18.67%, versus a 26.58% rise in the benchmark S&P 500 index during the same period.


About the Author: Anushka Dutta


Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...


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