Despite macroeconomic uncertainties, the travel industry’s prospects look promising, thanks to pent-up demand. Therefore, it could be wise for investors to buy fundamentally sound travel stock Bluegreen Vacations Holding Corporation (BVH) now. However, I think it would be wise to wait for a better entry point in Airbnb, Inc. (ABNB).
Total travel spending in the US increased by 1.2% over July 2022 and was up 4.1% year-to-date through July 2023. Air travel demand surged 12% in July compared to the same month last year.
According to WTTC’s Travel & Tourism Economic Impact 2023 global trends report, the U.S. Travel & Tourism sector’s GDP contribution grew by 16.9% to $2 trillion in 2022. Also, the sector has created 2.7 million jobs since 2021. WTTC predicts that the sector’s GDP contribution will be $2.2 trillion in 2023, with 17.4 million jobs.
Julia Simpson, WTTC President & CEO, highlighted, "The U.S.’s performance is more than just numbers; it shows the resilience and enduring demand for Travel & Tourism.”
The worldwide travel and tourism market is predicted to grow at a 4.4% CAGR to $1.02 trillion by 2027. This is driven by factors like rising disposable income and rising interest in travelling.
Also, the development of the tourism and travel market has been aided by technological developments and the simplicity of online booking platforms.
Let’s discuss the fundamentals of the Travel – Hotels/Resorts stocks mentioned above.
Stock to Buy:
Bluegreen Vacations Holding Corporation (BVH)
BVH operates as a vacation ownership company. The company markets and sells vacation ownership interests (VOI); and manages resorts in leisure and urban destinations, including Orlando, Las Vegas, Myrtle Beach, Charleston, and New Orleans.
BVH’s trailing-12-month EBIT margin of 28.90% is 292.7% higher than the industry average of 7.36%. Its trailing-12-month EBITDA margin of 30.95% is 183.2% higher than the industry average of 10.93%.
In the second quarter that ended June 30, 2023, BVH’s total revenue increased 10.6% year-over-year to $260.62 million. Also, its sales of VOIs stood at $150.36 million, up 4.2% year-over-year. The company’s net income and EPS came in at $21.91 million and $1.34, up 23.2% and 54% from the prior-year quarter, respectively.
Analysts expect BVH’s revenue to increase 5.5% year-over-year to $969.91 million for the year ending December 2023. Its EPS is expected to grow 19.7% year-over-year to $4.19 for the same period. It surpassed EPS estimates in three of four trailing quarters. The stock has gained 92% over the past year to close the last trading session at $32.06.
BVH’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
BVH has a B grade for Value and Sentiment. It is ranked #2 out of 21 stocks in the B-rated Travel – Hotels/Resorts industry. Click here for the additional POWR Ratings for Growth, Momentum, Stability and Quality for BVH.
Stock to Hold:
Airbnb, Inc. (ABNB)
ABNB, together with its subsidiaries, operates a platform that enables hosts to offer stays and experiences to guests worldwide.
ABNB’s trailing-12-month levered FCF margin of 31.14% is 508.5% higher than the industry average of 5.12%. Its trailing-12-month CAPEX / Sales of 0.32% is 90.1% lower than the industry average of 3.22%.
ABNB’s revenue for the fiscal second quarter that ended June 30, 2023, increased 18% year-over-year to $2.48 billion. The company’s net income and EPS came in at $650 million and $0.98, up 71.5% and 75% from the prior-year quarter, respectively.
However, as of June 30, 2023, the company’s total current liabilities stood at $13.62 billion, compared to $7.98 billion as of December 31, 2022. Also, its total liabilities amounted to $16.13 billion, compared to $10.48 billion for the same period.
The consensus revenue estimate of $9.83 billion for the year ending December 2023 represents a 17.1% increase year-over-year. Its EPS is expected to grow 38.5% year-over-year to $3.86 for the same period. It surpassed EPS estimates in all four trailing quarters.
ABNB’s shares have gained 13.5% over the past nine months to close the last trading session at $118.50. However, the stock has lost 20.3% over the past three months.
ABNB’s optimistic fundamentals are reflected in its POWR Ratings. The stock has an overall rating of C, which equates to a Neutral in our proprietary rating system.
It is ranked #15 in the same industry. It has a C grade for Growth and Sentiment. To see additional ABNB’s ratings for Value, Momentum, Stability and Quality, click here.
What To Do Next?
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BVH shares were trading at $32.10 per share on Thursday afternoon, up $0.04 (+0.12%). Year-to-date, BVH has gained 30.88%, versus a 9.09% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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