What Happened?

A number of stocks jumped in the afternoon session after global oil prices slid 3%, easing cost pressures across the transportation and leisure ecosystem. 

WTI crude broke below the psychological $70 level, while the 10-year Treasury yield simultaneously dropped below 4.5%. The travel sector is highly sensitive to both input costs and consumer discretionary income. Lower oil prices directly benefit fuel-intensive travel operators like cruise lines.

Simultaneously, falling energy costs act as a tax cut for consumers, leaving more disposable income for vacations and experiences. The dual tailwind of lower yields and cheaper oil validates the thesis that consumer travel spending can remain resilient even as inflation cools.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Consumer Discretionary - Travel and Vacation Providers company Royal Caribbean (NYSE: RCL) jumped 4%. Is now the time to buy Royal Caribbean? Access our full analysis report here, it’s free.
• Consumer Discretionary - Travel and Vacation Providers company Lindblad Expeditions (NASDAQ: LIND) jumped 5.4%. Is now the time to buy Lindblad Expeditions? Access our full analysis report here, it’s free.

Zooming In On Lindblad Expeditions (LIND)

Lindblad Expeditions’s shares are very volatile and have had 21 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 29 days ago when the stock gained 2.8% on the news that WTI crude crashed 4.7% to $92.94 on Iran-US peace deal progress, providing direct relief to airlines, hotels, cruise lines, and online travel agents. 

Airlines spend a significant portion of operating costs on jet fuel, so a 5% drop in crude flows almost directly to airline margins. Cruise lines and hotels also benefit from reduced bunker fuel and operating energy costs.

Peace progress reduces geopolitical anxiety, which historically drives travel demand recovery within weeks. Lower oil cuts costs while lower yields make consumer financing for vacations cheaper. Also, recent consumer data revealed a surprising uptick in vacation plans. 

Despite a broader decline in consumer confidence due to inflation, reports from The Conference Board revealed a notable shift in spending priorities. While consumers cut back on discretionary goods, they earmarked more funds for experiences. 

The May survey showed an increase in expected spending on hotels and airfare for personal travel, correlating with a rise in vacation intentions. This suggests that even with tighter budgets, consumers are prioritizing travel, providing a positive outlook for airlines, cruise lines, and hotel operators, especially with the summer season approaching.

Lindblad Expeditions is up 87.1% since the beginning of the year, and at $27.02 per share, it has set a new 52-week high. Investors who bought $1,000 worth of Lindblad Expeditions’s shares 5 years ago would now be looking at an investment worth $1,682.

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