Travel stocks started off moving up in 2019. By August, however, the overall market became volatile, as the travel industry has slowed down also due to natural disasters and terrorism. Furthermore, several companies have made soft projections for the rest of the year. Here are important points to know about trading travel stocks in the short-term.
Bad News for Tourism
Over the previous summer of 2018, the travel industry was hit with a series of negative stories that included terrorist attacks throughout Europe. Hurricane Harvey also scared travelers due to the devastation it caused the Houston area. Then came Hurricane Irma, which ripped through the Caribbean and South Florida. These natural disasters led to cancellations of flights, hotel reservations, and cruise line tickets.
These disasters scared investors supporting travel stocks. Then to make matters worse, several big names in tourism announced lower third-quarter guidance, such as Priceline, Expedia, and Trivago. Priceline, for example, projected just 11-16 percent growth a year after a booming period of 25 percent growth.
Even though Trivago’s revenue was up 67 percent for the first half of 2018, full-year revenue was only expected to rise by 40 percent. Travel stocks went down, including Expedia, except for a different reason, as the company’s CEO jumped ship to join Uber.
How Travel Has Played Out in 2019
Indeed, key travel stocks such as Expedia (EXPE) peaked in the summer of 2017. In late 2019 the stock pulled back enough to expect upward trends during the holiday season.
Expedia nearly tagged $160 in the summer of 2017. Two years later, it’s trading near $135 and has retraced as high as $144. For the past year, earnings have routinely beaten analyst estimates as analysts lean toward “buy” ratings. Trip Advisor (TRIP) has been more volatile but presents a buying opportunity in November 2019. Trading around $40 per share, TRIP has gone on a broad pullback from over $110 in 2014.
USTravel.org’s Travel and Tourism Overview of 2018, stated that travel within the United States increased by nearly 2 percent to a total of 2.3 billion person-trips. Leisure travel comprised 80 percent of all domestic travel throughout 2018. The sum of domestic and international travel spending surpassed $1 trillion, which helped pay for nearly 9 million U.S. jobs.
In other words, travel is not an industry that’s about to disappear. Even though bad news can bring down travel stocks, which can scare investors in broader markets, it’s a cyclical industry. It appears late 2019 is a period to buy certain travel stocks at bargain prices.