Though the hot summer is over, travel stocks are heating up. The bounce-back in consumer spending is pushing airline stocks and related services higher.
And it's fueling our top travel stock of 2019.
In fact, with rock-solid cash flow and earnings growth, this might be one of our favorite breakout stocks in the year ahead. But there's plenty more driving it up.
This is the second fastest-growing sector in the world behind manufacturing. That means it beat healthcare, financial services, and information technology.
Numbers from the World Travel and Tourism Council (WTTC) say travel tourism grew 3.9% in 2018, providing $8.8 trillion and 319 million jobs globally. The WTTC predicts that it will be adding more than 100 million new jobs to the world economy in the next 10 years - that's 421 million total jobs by 2029.
A bigger travel industry means more booking. And trends in online booking and international travel will no doubt provide a windfall for our best travel stock.
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While investors glossed over this stock, we found it using the Money Morning Stock VQScore™ system.
This proprietary rating system digs deep into the balance sheets and fundamentals of thousands of companies. Then it assigns every company a rating of 1 to 4.9.
The score is simple. If it registers above 4, you buy the stock and prepare for the breakout.
Our travel stock pick has a score above 4. In fact, it's a near-perfect VQScore.
And we want to make sure you're in the know early, because it could rise quickly. It's in the "Buy Zone." But with the travel industry growing so fast, it might not be for long...
The Best Travel Stock in 2019
[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]Booking Holdings Inc. (NASDAQ: BKNG) is a digital travel platform behind the bidding site Priceline and Kayak.com.
In 2019, the BKNG stock price has stagnated despite remarkable earnings growth. The leading provider in online travel, Booking operates in 230 countries and territories and 40 different languages around the globe.
A combination of organic growth and strategic acquisitions has cemented the firm's position atop its industry. In 2018 alone, it had $92.7 billion in gross bookings across all of its properties. And its earnings growth has been nothing short of exceptional.
During the first two quarters of 2019, the company reported earnings of $1.75 billion. That figure is more than double the $837 million it reported during the same period in 2018.
But its VQScore of 4.6 signals it is poised for even better earnings growth in 2020. Let's dig into the numbers and explore why.
First, the company continues to succeed at generating far more cash flow than the bulk of its peers. Year-over-year cash flow growth this year clocked in at 14.9%, a figure that easily tops its competitor average of 9.7%. It's also grown 17.1% over the last three to five years.
Expect the BKNG bottom line to improve dramatically.
Booking has used its strong cash flow to buy back stock and improve shareholder value. As cash flow continues to grow, look for the stock to receive additional boosts from buybacks.
Second, the firm's numbers continue to improve across almost all verticals. It reported 213 million rooms booked through its platforms in Q2 2019. That figure is an 11.8% jump from the same period in 2018. Also, it reported 1.2% growth in rental car days and 2.4% growth year over year in the number of airline tickets it sold.
Those latter figures should improve as the firm cuts back on advertising costs and technology investments.
Bottom Line
Booking Holdings isn't a cheap stock by any means. At $2,068 per share, it's one of the most expensive stocks on the S&P 500 by nominal price. But this price might actually be a bargain compared to its 52-week target.
With a VQScore of 4.6, we have set a price target of $2,450 over the next 12 months. That represents a potential upside of 18.5% from Friday's closing price.
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About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.