The travel industry was hit badly by the COVID-19 pandemic as traveling practically came to a halt owing to restrictive containment measures. The industry received a ray of hope in November 2020 as Pfizer, Inc.'s (PFE) COVID-19 vaccine was found to be effective. But although half of American adults are now fully vaccinated against the coronavirus, the travel industry has yet to see a robust revival of demand for travel.
It’s expected to be a long time before the global travel industry returns to pre-pandemic business levels because many countries are still experiencing new COVID-19 infections. Furthermore, many Americans are still resistant to receiving the COVID-19 vaccine, which is contributing to the challenging backdrop the industry faces. Adding to concerns, most travel-related companies have huge debt loads and are expected to lose money again this year.
Booking Holdings Inc. (BKNG), Airbnb, Inc. (ABNB), and Carnival Corporation & plc (CCL) are three struggling stocks in the travel sector. Along with the weak industry backdrop, we think their weak financials make these stocks best avoided now.
Booking Holdings Inc. (BKNG)
BKNG provides online reservation for travel, restaurant and related services worldwide. The company operates through Priceline, Booking.com, Rentalcars.com, Agoda, KAYAK and OpenTable. It offers online travel reservation services, online rental car reservation services, and travel-related insurance products, among others.
On March 9, 2021, KAYAK announced the opening of its own hotel in Miami Beach. However, given that the world is still recovering from the COVID-19 pandemic, it's too soon to understand if the hotel will be able to attract sufficient guests to be profitable in the near term.
BKNG’s revenue decreased 50.1% year-over-year to $1.14 billion for the first quarter, ended March 31. Its operating loss was $311 million, compared to a $309 million operating loss in the prior-year period. Its net loss was $55 million compared to a $699 million net loss in the year-ago period. The company’s loss per share came in at $1.34 compared to a $17.01 loss per share in the prior-year period.
The company’s revenue is expected to increase 37% year-over-year to $9.31 billion in its fiscal year 2021. However, analysts expect its EPS to remain negative in the current quarter, ending June 30. The stock has lost 2.4% over the past month to close yesterday’s trading session at $2,339.01.
BKNG’s poor prospects are apparent in its POWR Ratings also. The stock has an overall D rating, which equates to Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
BKNG has an F grade for Growth, and a D grade for Value. Click here to see the additional POWR ratings for BKNG (Momentum, Sentiment, Stability and Quality). It is ranked #51 of 71 stocks in the Internet industry.
Airbnb, Inc. (ABNB)
Founded in 2007, ABNB operates a platform for accommodations and experiences for guests worldwide. The company's marketplace model connects hosts and guests online to book spaces and experiences. It offers primarily private rooms and luxury villas.
On May 24, ABNB introduced Airbnb 2021 Release, which includes more than 100 upgrades to refine and improve every aspect of its service—from its website and app to its community support and policies.
For the first quarter, ended March 31, 2021, ABNB’s loss from operations increased 37.3% year-over-year to $446.94 million. Its loss before income taxes grew 226.5% year-over-year to $1.16 billion, while its net loss increased 244.1% year-over-year to $1.17 billion. The company’s loss per share increased 50% year-over-year to $1.95.
ABNB’s annual revenue is expected to increase 29.4% in its fiscal year 2022. However, analysts expect its EPS to remain negative in fiscal 2021 and 2022. The stock has lost 26.4% over the past three months to close yesterday’s trading session at $133.99.
ABNB’s POWR Ratings are consistent with this bleak outlook. The stock has an overall D rating, which equates to Sell in our proprietary rating system. The stock has a D grade for Value, Stability and Sentiment.
Click here to see ABNB’s ratings for Momentum, Quality and Growth also. ABNB is ranked #13 of 19 stocks in the F-rated Travel - Hotels/Resorts industry.
Carnival Corporation & plc (CCL)
CCL is an international leisure travel company that operates approximately 87 ships. It operates under the brand names that include Carnival Cruise Line, Princess Cruises, and Holland America Line and its ships sail to all cruise destinations, including Alaska, Antarctica and Patagonia, Arabia, Africa and India.
On April 15, 2021, Holland America Line launched a new ‘Have It All’ premium package that includes shore excursions, beverages, specialty dining and Wi-Fi in one base cruise fare. However, it’s uncertain whether this promotion will help improve the company’s financials in the near-term.
CCL’s revenue decreased a whopping 18,319.2% year-over-year to $26 million for its fiscal first quarter, ended February 28, 2021. Its operating loss increased 113.7% year-over-year to $1.52 billion, while its net loss increased 152.6% year-over-year to $1.97 billion. The company’s loss per share increased 57.9% year-over-year to $1.80.
Analysts expect the company’s annual revenue to decrease 33.1% year-over-year to $3.74 billion in its fiscal year 2021. Its EPS is expected to remain negative in fiscal 2021. Also, it failed to surpass the Street’s EPS estimates in three of the trailing four quarters. It is currently trading 6.7% below its 52-week high of $30.63, which it hit on April 7, 2021.
CCL’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall F rating, which translates to Strong Sell in our proprietary rating system. It has an F grade for Value, Stability and Quality, and a D grade for Sentiment and Growth.
Click here to see CCL’s rating for Momentum as well. CCL is ranked #4 of 4 stocks in the F-rated Travel - Cruises industry.
BKNG shares were trading at $2,366.59 per share on Wednesday morning, up $27.58 (+1.18%). Year-to-date, BKNG has gained 6.26%, versus a 12.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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