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Should Investors Buy These Beaten Down Travel Stocks Now?

Investors believe that travel stocks may eventually recover, and it could happen faster than we expect.

Travel Stocks Are Hitting The Low Note; Is It Time To Buy?

Travel stocks are on Robinhood investors’ radar again. This came after most airline stocks and cruise stocks have been caught up in the sell-off, most of which saw their valuation cut by half. Among the top 10 popular stocks on Robinhood, American Airlines (AAL Stock Report), Delta Air Lines (DAL Stock Report) and Carnival Corp (CCL Stock Report) are now popular in the trading platform. Does this mean that investors are rushing in to bet for a rebound again? You tell me.

No doubt, the travel industry took a hit from the coronavirus pandemic. As reflected from the ETFMG Travel Tech ETF (AWAY Stock Report), the sector is down more than 25% year to date. Its sharpest decline of 50% was in March, but it has since rebounded slightly. Yes, the benchmark for the travel sector has improved. But some of the biggest names among the airlines and cruise stocks have yet to have the fundamentals to recover.

One thing we can be relatively sure is, the chances of the biggest names staying down forever is quite remote. In fact, there’s already some momentum building in the industry. As such, we are seeing investors pinning their hopes for a rebound when the airline stocks and cruise stocks reach a new low again. While there’s pickup for local air travel, the demand for international demand remains low. The journey in investing in travel stocks may be a slow one. But for investors with a longer time horizon, the sell-off has created opportunities to buy airline and cruise stocks at a steep discount.

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Top Travel Stocks To Buy Among Robinhood Investors [Or Avoid]: Delta Air Lines

Shares of Delta Air Lines are feeling the pinch again after a strong rally for a couple of months. Of course, a lot of pessimism towards DAL stock has to do with its latest earnings and air traffic volumes. The longer the coronavirus pandemic is here to stay, the lower the chance for the airline industry to survive through the storm. To ensure survivability of the airlines,  the U.S. government has to allocate some funds to make sure these airlines can meet their payrolls and existing liabilities.

The fundamentals for each airline is different. Ultimately, it all boils down to which company has enough cash buffer to weather the storm. The stronger balance sheet and lower cash-burn rate are simply the reason why investors are more hopeful of DAL stock.

The airline added debt to the balance sheet at a time when the company had no sales. That’s not a reason to rejoice. But, the lower rate of borrowing compared to its industry peers is worth the praise.

[Read More] Should These Health Care Stocks Be On Your Watchlist In August 2020?

Top Travel Stocks To Buy Among Robinhood Investors [Or Avoid]: American Airlines

American Airlines may take a good deal longer than originally thought to turn around. This already seems clear in the recent movements in AAL stock. But could this be an opportunity to buy the stock on discount? After AAL stock reached a recent high of $20.31 in the last two months, the stock has been sliding ever since. Now that airline stocks are showing some momentum this week, could AAL stock be trending again starting next week?

Raymond James analyst Savanthi Syth upgraded her rating on shares of American from Underperform to Neutral on Monday, writing that she sees “balanced risk-reward” in the stock, which is down more than 40% from peak prices in early June.

American Airlines reported a $2.7 billion pre-tax loss for the second quarter. It predicted third-quarter capacity will be down 60% year over year. Some analysts may say that serious investors might be better off buying AAL stock when it is trading at single digits. While it may be one of the top airline stocks in the U.S., its debt levels are what concerns investors the most. Which makes it a more risky play compared to other airlines. But the question is, do greater risks come with greater reward in this case?

By Brett David

Brett David is a digital marketing and finance professional for nearly 10 years now and a contributing author for StockMarket.com. His passion for digital marketing and the stock market began after graduating with a B.S.B.A in business administration and finance. After completing college, he went on to becoming an entrepreneur in the marketing and finance space, which led to becoming a contributor to outlets such as ThriveGlobal.com, MarijuanaStocks.com, MarketingAgency.com and SearchEngineWatch.com.

Brett loves the ability to deliver to his readers engaging and educational content that can be easily consumed by the reader. He enjoys writing about a wide variety of companies ranging from blue-chip stocks to the undervalued small and micro cap stocks. His favorite stock market sectors today to write about are: Tech, Cannabis, Mining, Biotech, and TMT.

Brett has worked with hundreds of publicly traded companies on increasing their digital footprint and corporate outreach since 2013.

You can find Brett most of time digging through corporate filings conducting fundamental analysis or at an industry conference looking for the next big trend or company to hit the street. His digital marketing experience gives a competitive edge over other contributing authors by allowing him to see and analyze trends faster than the next person.

Brett, a South Florida native, enjoys spending time with his wife and son outdoors, and is an avid basketball and MMA fan.

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