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September's Top 3 Travel Stocks to Watch for Growth

Following macro headwinds, the travel industry is primed for expansion, propelled by pent-up demand sparking a travel resurgence. Accordingly, it could be wise to monitor leading stocks Carnival Corporation (CCL), Lindblad Expeditions (LIND), and Royal Caribbean Cruises (RCL) for potential growth. Read on…

The travel industry is displaying remarkable resilience. Pent-up demand is spurring a resurgence in travel reservations, a trajectory expected to persist in the near future.

To that end, one could monitor prominent travel stocks Carnival Corporation & plc (CCL), Lindblad Expeditions Holdings, Inc. (LIND), and Royal Caribbean Cruises Ltd. (RCL), which hold the potential for solid growth. Before delving into the highlighted stocks, let’s examine what’s happening in the travel space.

The travel and tourism industry surged last year, recording a 22% year-over-year growth to reach $7.70 trillion. Projections for 2023 show an ascent to $9.50 trillion, a mere 5% dip from the pre-pandemic peak of 2019 when global travel peaked. Notably, 34 nations have already surpassed 2019 benchmarks.

With that being said, the cruise sector remains a prominent player in the rapidly advancing travel industry. Following a period of enduring challenges and uncertainty, cruise lines are now primed for a robust year, driven by the ascending travel demand and the eagerness of consumers to commence their voyages.

An AAA survey revealed that 52% of U.S. adults demonstrate an equal or heightened inclination to contemplate embarking on a cruise vacation compared to their predisposition prior to the pandemic. This marks a noteworthy rise from the preceding year's figure of 45%.

The Cruise Lines International Association's (CLIA) 2023 State of the Cruise Industry Report anticipates that global cruise tourism will grow nearly 20% by 2028. Projections indicate that cruise tourism in 2023 will surge to 106% of 2019 levels, accommodating 31.5 million passengers.

Looking forward, the global cruise market size is estimated to grow at a CAGR of 11.5% and reach $22.80 billion by 2032, as per a report by Market.Us.

In light of these encouraging trends, let's look at the fundamentals of the three leading Travel - Cruises stocks, beginning with number 3.

Stock #3: Carnival Corporation & plc (CCL)

CCL offers leisure travel services by operating a fleet of over 90 ships that visit around 700 ports. Additionally, the company owns, operates, and manages hotels, lodges, glass-domed railcars, and motorcoaches, while also providing port destinations and various related services.

On August 24, CCL announced the opening of bookings for Holland America Line's 2025 European season, a CCL segment. With extended cruises over 10 days, more Iceland sailings, and 62 overnight stays in European cities, travelers can deeply engage with the region's culture and landscapes.

The introduction of these enhancements could bolster the company's appeal to those craving immersive travel experiences. This move aligns with CCL's strategy to cater to travelers' desires for comprehensive and culturally enriching journeys, thus potentially driving increased engagement and loyalty among its customer base.

On the same day, Carnival Cruise Line, a division of CCL, unveiled additional details about its 2025-26 deployment. It has introduced new voyages to Alaska from Seattle, showcasing ships Carnival Spirit and Carnival Luminosa. Additionally, the company has opened bookings for other Carnival Journeys cruises.

The allure of Alaska cruises lies in abundant wildlife, well-preserved natural marvels, onshore adventures, and the warmth of the locals. These factors contribute to their rapid popularity and booking pace. This advancement should benefit the company significantly by enhancing customer satisfaction and experience.

Over the past three years, CCL’s revenue increased at a CAGR of 1.3%. In addition, the company’s total assets grew at a 1.4% CAGR during the same period.

For the second quarter that ended May 31, 2023, CCL’s revenues increased 104.5% year-over-year to $4.91 billion. Its operating income came in at $120 million, compared to an operating loss of $1.47 billion in the prior year’s period.

In addition, as of May 31, 2023, the company’s cash and cash equivalents stood at $4.47 billion, compared to $4.03 billion as of November 30, 2022. Its total assets amounted to $51.87 million, up from $51.70 billion as of November 30, 2022.

The consensus revenue estimate of $23.84 billion for the fiscal year ending November 2024 reflects a 12.2% year-over-year growth. Likewise, analysts expect the company’s EPS to come in at $0.93, up 764.3% year-over-year. CCL’s shares have gained 101.3% year-to-date to close the last trading session at $16.04.

CCL’s fundamentals are apparent in its POWR Ratings. CCL has an A grade for Growth and a B for Momentum. It is ranked last in the 4-stock Travel - Cruises industry. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

In addition to the POWR Ratings I’ve just highlighted, you can see CCL’s ratings for Value, Sentiment, Quality, and Stability here.

Stock #2: Lindblad Expeditions Holdings, Inc. (LIND)

LIND delivers marine expedition adventures and global travel experiences. Within its Lindblad segment, the company provides ship-based expeditions. The Land Experiences segment encompasses diverse natural habitats, offering a range of over 100 expedition itineraries across seven continents and spanning more than 45 countries.

On June 16, LIND-National Geographic revealed a collaboration with FOOD & WINE, renowned for its expertise in food, drink, travel, design, and entertainment. The alliance introduces captivating gastronomic expeditions aboard National Geographic Sea Bird and Sea Lion.

Across an eight-day Columbia and Snake Rivers Journey, guests will indulge in local flavors and wines, predicted to significantly enhance customer satisfaction, ultimately benefiting the company.

LIND’s revenue grew at a CAGR of 27.2% over the past three years. Its EBITDA increased at a 44.5% CAGR. Moreover, the company’s total assets rose at a CAGR of 8.3% during the same time frame.

For the second quarter that ended June 30, 2023, LIND’s tour revenues increased 37.3% year-over-year to $124.80 million. Its adjusted EBITDA stood at $6.22 million, compared to a loss of $6.19 million in the previous year’s quarter.

Moreover, the company’s free cash flow came in at $4.79 million, compared to a negative cash flow of $4.91 million in the prior year’s period. As of June 30, 2023, LIND’s cash and cash equivalents stood at $142.95 million, compared to $87.18 million as of December 31, 2022.

For the fiscal third quarter ending September 2023, analysts expect LIND’s revenue to increase 56% year-over-year to $170.07 million. Also, the company’s EPS for the ongoing quarter is expected to increase 127.8% year-over-year to $0.05. Moreover, LIND’s EPS is expected to grow 25% per annum over the next five years.

The stock has gained 16% year-to-date, closing the last trading session at $9.35.

LIND’s prospects are reflected in its POWR Ratings. LIND has a B grade for Growth and Momentum. It has ranked #2 out of 4 stocks within the same industry.

Click here to access the additional LIND ratings (Value, Quality, Stability, and Sentiment). 

Stock #1: Royal Caribbean Cruises Ltd. (RCL)

RCL provides a diverse array of global itineraries, visiting around 1,000 destinations across all seven continents. The company owns and operates three prominent cruise brands on a global scale: Royal Caribbean International, Celebrity Cruises, and Silversea Cruises.

On August 25, Royal Caribbean International and Inter Miami CF unveiled a pioneering, multiyear partnership, merging two vacation and sports leaders. RCL's new roles as the Club's Primary and Official Vacation Partner are poised to elevate brand visibility and customer interaction, providing the company with considerable benefits.

Over the past three years, RCL’s revenue rose at a CAGR of 14.9%. Additionally, the company’s EBITDA increased at a 33.8% CAGR during the same period.

For the second quarter that ended June 30, 2023, RCL’s total revenues increased 61.3% year-over-year to $3.52 billion. Its adjusted EBITDA rose 969.3% from the year-ago value to $1.17 billion.

Furthermore, adjusted net income attributable to RCL and adjusted EPS came in at $491.67 million and $1.82, compared to a loss and loss per share of $530 million and $2.08 in the prior year’s quarter, respectively.

The company’s revenue for the fiscal year ending December 2024 is expected to increase 12% year-over-year to $15.48 billion. Similarly, analysts expect RCL’s EPS for the next year to come in at $8.26, up 34.9% from the previous year. Furthermore, the company topped the consensus EPS estimates in all four trailing quarters.

Year-to-date, the stock has gained 138.3%, closing the last trading session at $100.53.

RCL’s outlook is apparent in its POWR Ratings. The stock has an A grade for Growth and a B for Momentum. It has topped the 4-stock Travel – Cruises industry.

Click here to access additional RCL ratings for Value, Quality, Sentiment, and Stability.

What To Do Next?

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RCL shares were trading at $100.45 per share on Wednesday morning, down $0.08 (-0.08%). Year-to-date, RCL has gained 103.22%, versus a 18.92% rise in the benchmark S&P 500 index during the same period.

About the Author: Aanchal Sugandh

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.


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