Fasten Your Seatbelts: 3 Travel Stocks Ready for Takeoff

Travel stocks are an obvious example of a seasonal trading play as demand for travel services responds to changes in weather. Ski resorts experience increased demand during the winter months. However, many industries, such as hotels in resort locations, airlines, cruise lines and restaurants, see a summer demand surge.

Typically, June delivers strong performance. So, it may be prudent to consider travel stocks as summer travel commences. With declining inflation, many consumers appear eager to travel more. Global airlines forecast improved profits this year owing to soaring travel demand.

The travel industry has been in recovery mode since the pandemic, with last year ending Covid-19 disruption. It appears as if people are making up for lost time. Wherever the motivation lies, travel appears poised for growth. As such, traders may benefit from engaging with this market before the last boarding call.

Booking (BKNG)

The reservation and payment processor company Booking (NASDAQ:BKNG) is one of the top travel stocks to consider just as summer travel commences. Booking.com is the top app for travelers. Although it is best known for its flagship booking.com site, it also owns several other brands, including Agoda and rentalcars.com.

Further, Booking could benefit from a broad increase in travel interest. So, travel stocks may see gains in an environment of people searching for bargains. They increasingly turn to the internet to plan their own travel independently.

After reporting solid Q1 earnings, with bookings growing 10% over the prior year, the Booking share price received a boost. However, the BKNG stock has since traded relatively stable, allowing the rest of the market to catch up and catch a pretty average price-to-earnings (P/E) ratio of 28.4x. This is on par with the average for internet content companies of 28.2x.

Therefore, analysts are generally optimistic about the Booking stock, with an average target price of $4,048 per share, representing a 7% upside.

Royal Caribbean (RCL)

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Travel stocks have been recovering since the pandemic, and the cruise industry is no exception. Despite booking rates have returned to normal, many companies still bear scars. They had to increase debt significantly to remain operational during difficult times.

Also, rising interest rates burdened stock prices last year. However, borrowing will become cheaper as the Fed is expected to ease monetary policy. Cruise lines could see a double benefit from increased travel demand and lower financing costs.

Royal Caribbean (NYSE:RCL) stands out as one of the travel stocks likely to benefit this summer. Its focus is on the Americas, avoiding the geopolitical effects of the Red Sea crisis. Carnival (NYSE:CCL) said it expects this to hurt its EPS by $0.07-0.08.

The RCL stock trades at a reasonably attractive valuation of 18.8x its earnings. Interestingly, its P/E ratio has decreased over the last few quarters as earnings have outpaced price growth, implying unlocked upward potential if performance exceeds this year.

Delta Airlines (DAL)

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We cannot discuss travel stocks taking off without mentioning at least one airline stock. Delta Airlines (NYSE:DAL) consistently performs well in the sector. While it may not offer the greatest growth potential, it has the largest commercial fleet worldwide.

Strategic investments in other airlines with growth opportunities, such as Latam, indicate Delta could provide stable returns in an expanding industry. Its most recent earnings report showed sales increasing by 6% year-over-year (YOY) and forecasts further sales growth of 5-7% for the current year.

The DAL share price grants a P/E ratio of just 6.5x its earnings, below the industry’s average, with a mean of 15.2x. Notably, it has been beating consensus EPS estimates for several quarters now, with last year seeing a 164% growth while price gains posted only a 38% increase.

Therefore, analysts unanimously recommend either a buy or a strong buy of DAL stock. The average target price stands at $61.14 per share, representing nearly 20% upside potential.

On the date of publication, Stavros Tousios did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.