Travel stocks have taken a beating this week as the COVID-19 delta variant spreads rapidly around the world, forcing a recurrence of lockdowns and international travel restrictions. Even still, traders say there are 2 stocks in the sector that still look like buys.
Travel stocks were hit hard on Thursday amid a broader market sell-off due to growing fears that the global economic recovery could be slowing down as the COVID-19 delta variant wreaks havoc.
Shares of Carnival (NYSE: CCL), Norwegian Cruise Line (NYSE: NCLH), and Royal Caribbean (NYSE: RCL) all lost more than 1%, along with Delta Air Lines (NYSE: DAL) and United Airlines (NASDAQ: UAL).
The spread of the delta variant forced Japan to declare a state of emergency in Tokyo for the upcoming Olympics, and the highly transmissible variant is spreading rapidly in the U.S. causing health experts to warn that a revival of indoor mask mandates and other public health measures will likely be needed in the coming months.
Parts of Asia, Europe, and Australia have even issued new lockdowns and reimposed travel restrictions given the rebound in COVID cases globally.
But even as such actions impede global travel, traders say there are still a couple of stocks in the sector that are safer bets.
“In a situation like this, you want to be more diversified so I would stay away from the hotels and a lot of the cruises,” said Delano Saporu, founder of New Street Advisors. “Look more for the point of source which is a booking platform.”
In particular, Saporu likes TripAdvisor (NASDAQ: TRIP) right now. The online travel booking site’s shares are up 96% over the last year, but have taken a hit recently and are down 6.5% over the last week, dropping 1.4% on Thursday alone.
“I like TripAdvisor here for a few reasons,” Saporu said. “One, that first point of contact for people and two, diversification of their businesses, right? So, they have the experiences and dining, they have different areas where they can have a revenue source.”
From a technical perspective, the stock has fallen to the 61.8% Fibonacci retracement, marking a deep correction, and is nearing oversold conditions, both bullish signs for TripAdvisor shares.
Oppenheimer’s Ari Wald advises investors to be selective in the travel sector now, and has a different travel stock in mind.
“What’s equally important to us is how these stocks behave on the down cycle, not only when the trade is working. The trade isn’t working right now,” Wald said. “We like that Hilton (NYSE: HLT) has been able to keep pace on the upside and hold up much better when the group and the industry is trading lower.”
Pointing to the stock’s chart, Wald noted that—when compared with competitor Marriott (NASDAQ: MAR)—Hilton has outperformed this year. Oppenheimer’s head of technical analysis also argues that Hilton is the best bet among hotel stocks.
Marriott shares are up 10.3% so far this year, while Hilton has gained nearly 15% year-to-date. Hilton shares have also outperformed over the last week, gaining 2% compared to Marriott’s gain of less than 0.5%.