Oil prices are skyrocketing as the Russian invasion of Ukraine raises concerns about oil supply. The international benchmark Brent Crude fell 1.2% to $109.81 per barrel on Thursday, while the United States Crude per barrel prices jumped 5.7% before ending down 2.5%. Both benchmarks are up more than 40% for 2022, and the U.S. oil benchmark briefly topped $130 per barrel this week.
Furthermore, the spike in gas prices due to the Russia-Ukraine war has replaced COVID-19 fears as the prime deterrent to traveling this spring and summer. The travel industry might face significant headwinds due to rising oil and gas prices. In addition, global jet fuel prices have surged to near 14-year highs aligning with crude oil supply shortfalls. In turn, fare hikes are set to undermine the recovery in air travel.
Given this backdrop, we think fundamentally weak travel and tourism stocks Hyatt Hotels Corporation (H), Norwegian Cruise Line Holdings Ltd. (NCLH), MakeMyTrip Limited (MMYT), Lindblad Expeditions Holdings, Inc. (LIND), and Inspirato Incorporated (ISPO) might be best avoided for now.
Hyatt Hotels Corporation (H)
Chicago-based H is a hospitality company that operates in the United States and internationally. The company operates through Owned and Leased Hotels; Americas Management and Franchising; ASPAC Management and Franchising; EAME/SW Asia Management and Franchising; and Apple Leisure Group.
On February 8, H announced that a Hyatt affiliate had entered into a franchise agreement with Thera Island Suites S.A., owners of Magma Resort Santorini, and Athens-based SWOT Hospitality is set to operate the hotel. The hotel is expected to grow H’s brand footprint, but it might take some time before substantial gains can be realized from this venture.
For its fiscal fourth quarter, ended Dec. 31, H’s total revenues increased 153.8% year-over-year to $1.08 billion. However, its adjusted net loss attributable to H rose 70.9% from the prior-year quarter to $306 million, while its loss per share, adjusted for special items, rose 57.1% from the same period last year to $2.78.
Analysts expect H’s EPS to come in at a negative $0.36 for its fiscal quarter, ending March 32, 2022.
The stock has declined 5.3% in price year-to-date and 9.7% over the past month to close yesterday’s trading session at $90.86.
H’s POWR Ratings reflect this bleak outlook. The stock has an overall D rating, which equates to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
H has a Value, Stability, Sentiment, and Quality grade of D. In the 22-stock Travel – Hotels/Resorts industry, it is ranked #21.
Click here to see the additional POWR Ratings for H (Growth and Momentum).
Norwegian Cruise Line Holdings Ltd. (NCLH)
NCLH in Miami is a cruise company that operates in North America, Europe, Asia-Pacific, and globally. The company operates through the Norwegian Cruise Line, Oceania Cruises, and Regent Seven Cruises brands. It offers itineraries ranging from three-days to 180-days, calling on various destinations.
On February 23, NCLH announced that in connection with its previously announced private offering of $435.0 million of 2.50% exchangeable senior notes due 2027, the initial purchasers have notified the company of their intent to purchase an additional $38.175 million of the exchangeable notes. The offerings might represent a debt burden for the company, however.
NCLH’s operating loss increased 25.6% year-over-year to $686.87 million in its fiscal fourth quarter, ended December 31. Its loss per share rose 59.8% from the same period in the prior year to $4.01. And its adjusted net loss increased 11.9% from the prior-year period to $765.03 million.
The Street expects NCLH’s EPS to be negative $1.42 for the quarter ending March 31, 2022.
Over the past year, the stock has declined 39.7% in price and 14.2% year-to-date to close yesterday’s trading session at $17.80.
It is no surprise that NCLH has an overall F rating, which translates to a Strong Sell in our POWR Rating system.
NCLH has an F grade for Value, Stability, Sentiment, and Quality. It is ranked #2 of the four stocks in the Travel – Cruises industry. The industry is rated F.
To see the additional POWR Ratings for Growth and Momentum for NCLH, click here.
MakeMyTrip Limited (MMYT)
MMYT, which based in Gurugram, India, operates as an online travel company that sells travel products and solutions in India, the U.S., Singapore, Malaysia, Thailand, UAE, Peru, and Indonesia. The company operates through the Air Ticketing; Hotels and Packages; and Bus Ticketing segments.
For its fiscal third quarter, ended December 31, MMYT’s loss for the period increased 158.4% year-over-year to $9.04 million. Its loss per share rose 166.7% from the prior-year quarter to $0.08. And for the nine months ended December 31, the company’s cash and cash equivalent balance came in at $178.37 million, down 9.5% from the prior-year period.
The negative $0.17 consensus EPS estimate for the fiscal quarter, ending March 31, 2022, indicates a 466.7% year-over-year decrease. And the $78.74 million consensus revenue estimate for the same period reflects a decline of 0.6% from the prior-year quarter.
MMYT’s shares have declined 32.1% in price over the past year and 17.4% year-to-date to close yesterday’s trading session at $22.89.
These poor prospects are reflected in MMYT’s POWR Ratings. The stock has an overall D rating, which equates to Sell in our proprietary rating system.
MMYT has a Value, Stability, Sentiment, and Quality grade of D. In the 73-stock Internet industry, it is ranked #68. The industry is rated F.
Click here to see the additional POWR ratings for Growth and Momentum for MMYT.
Lindblad Expeditions Holdings, Inc. (LIND)
LIND in New York City is an expedition cruising and land-based adventure travel experiences provider. The company’s offerings include voyages on a fleet of owned expedition ships and seasonal charter vessels under the Lindblad brand.
On January 21, LIND announced that its subsidiary had priced $360 million of 6.750% senior secured notes due 2027. The company intends to use the net proceeds from the offering to prepay in full all its outstanding borrowings under its existing term loan.
LIND’s operating loss increased 1.5% year-over-year to $29.53 million in its fiscal fourth quarter, ended December 31. For the year ended December 31, its net cash provided by financing activities decreased 85.3% from the prior year to $50.41 million, while its cash, cash equivalent, and restricted cash balance came in at $172.69 million, down 15.6% from the prior year.
Analysts expect LIND’s EPS to remain negative at least until its fiscal year 2022.
The stock has declined 30.6% in price over the past year and 11.3% year-to-date to close yesterday’s trading session at $13.84.
LIND has an overall F rating, which translates to Strong Sell in our POWR Rating system.
LIND has an F grade for Sentiment and a D grade for Value and Quality. It is ranked #1 in the Travel – Cruises industry.
Click here to see the additional POWR Ratings for LIND (Growth, Momentum, and Stability).
Inspirato Incorporated (ISPO)
ISPO operates as a subscription-based luxury travel company that provides affluent travelers access to a managed portfolio of selected vacation options. The Denver, Colo.-based company went public on February 14 after a business combination with Thayer Ventures Acquisition Corporation.
For its fiscal fourth quarter, ended December 31, 2022, ISPO’s net loss and comprehensive loss increased 66.8% year-over-year to $8.62 million. Its loss per common unit rose 66.8% from the prior-year period to $7.39. And its adjusted EBITDA came in at a negative $6.11 million, down 69.9% from the prior-year quarter.
Analysts expect ISPO’s EPS to remain negative at least until its fiscal year 2023.
The stock has declined 66.5% in price over the past five days to close yesterday’s trading session at $14.23.
ISPO has an overall rating of D, which equates to Sell in our proprietary rating system.
ISPO has a Growth grade of F and a Value and Quality grade of D. In the 66-stock Fashion & Luxury industry, it is ranked #64.
In addition to the POWR Rating grades we have stated above, one can see ISPO ratings for Momentum, Stability, and Sentiment here.
H shares were trading at $90.81 per share on Friday afternoon, down $0.05 (-0.06%). Year-to-date, H has declined -5.31%, versus a -11.19% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More…