With two viable vaccines ready to roll out, some expect the travel industry to roar back to life in 2021. Investors are racing to catch potentially explosive gains by buying the best travel stocks right now.
But buyer beware: There is only one travel stock worth buying right now. And we're going to tell you all about it.
You see, some companies in the travel industry simply aren't going to make it, even with a vaccine. They could take years to recover their balance sheets if they get there at all. That means jumping into just any stock in this sector is riskier than you might think - especially now, with growing fear of a new virus strain.
Believe it or not, one of the best travel stocks in 2021 has recovered its losses and then some. It's still poised to grow over the next 12 months. And it will likely even make it through another COVID-19 outbreak.
That's right. Despite whatever volatility we're facing, even if we don't get a vaccine until 2045, there's a good chance this travel stock will still be standing.
First, I'll save you the trouble of looking at airlines and cruises.
American Airlines Group Inc. (NASDAQ: AAL) is down 46% since the crash in February. United Airlines Holdings Inc. (NASDAQ: UAL) is still down 50% on the year.
Many see this as an opportunity to buy cheap airline stocks. But this is far from the case.
The International Air Transport Association (IATA) says air travel won't recover until 2024. It may never reach pre-pandemic levels again either. Think of how many businesses have found ways to save money with remote work, cutting the need to buy expensive business class seats as fewer employees need to travel.
Cruise liners took it even worse, with Carnival Corp. (NYSE: CCL) losing over 60% of its price.
But before you expect tourists to be forking over thousands of dollars to get on cruises again, consider that Deutsche Bank expects cruise operators will be cutting their fleets by as much as 20% by 2023. That doesn't sound like a return to the good old days.
Of course, there will be opportunities for travel stocks over the next year. I'll show you why our top travel stock is poised to benefit the most...
What's Moving Travel Stocks in 2021
It's hard to pitch the "buy low/sell high" wisdom with so many unknowns in the near term. The opportunity is there - just not in the way you might think.
There are plenty of low-priced travel stocks right now. But the question is whether they are cheap or valued "just right."
One silver lining, believe it or not, is that real demand for travel is strong, regardless of how airlines and cruises have fared.
Most people have been itching to get out of town, and that is what's moving our best travel stock today.
However, it still matters what kind of travel we're talking about.
A survey from Longwoods International said the pandemic foiled nearly 70% of Americans' travel plans.
It didn't help that travel was also made less affordable to 30 million people who lost their jobs in the lockdowns.
Our New Favorite 5G Stock: The 5G industry is on track to be worth $11 trillion by 2026 - and one company is absolutely essential to its success. Get this pick for free here.
Airbnb struggled with revenue loss through the pandemic. But it had a 25% year over year surge in rentals in June for its rural locations.
The travel trend, then, is toward cheaper and closer getaways.
Now, for certain longar-distance travel stocks to pop in 2021, we would have to see some real progress in fighting the coronavirus pandemic.
Moderna Inc. (NASDAQ: MRNA) recently unveiled a vaccine with a 94% success rate. Before that, Pfizer announced a vaccine with 90% effectiveness.
There is still much progress to be made in getting that to market. In fact, it could take well into the next year for that to happen. Only then can we expect a wave of pent-up demand to be unleashed.
The small bit of good news in the flight industry is that companies like Southwest Airlines Co. (NYSE: LUV) will be better prepared than they were in the initial stages of COVID-19. As long as they aren't completely shut down, they can be more agile with their seating arrangements and other precautionary measures.
Meanwhile, most people will replace flying with driving. They will replace Cancun with Key West. If they're planning a far-off vacation, it will more likely be for 2022.
Whatever it may be, booking is going to continue, and with lower travel numbers, people are going to be hungry for a deal. That's going to keep our top travel stock today trudging upward, corona or no corona.
Best Travel Stock to Buy Now
[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
Expedia Group Inc. (NASDAQ: EXPE) is our top pure play in the travel industry right now. And it might be the only travel stock worth looking at in the near future.
This company serves consumers and small businesses booking deals online. And it profits no matter what kind of travel people are doing.
In fact, 70% of its sales come from hotel booking, so it's capturing both customers looking for international vacations and out-of-town weddings.
Nine percent of its sales come from advertising, which could even grow as travel companies try to lure customers back after the pandemic.
On top of that, Expedia is the biggest online travel agency. It owns hotels.com, Orbitz, and Vrbo, so it's getting revenue from the same market as Airbnb.
While Airbnb is the flavor of the week, EXPE owns its largest competitor and has been profitable for 10 years running - including jumping its profits by 39% in 2019.
Now that it's leaned out with its cloud initiatives, those numbers could be even better after the pandemic.
Expedia has also not yet reached its all-time high of $156, still sitting at $123. And you're going to see many people react to the vaccine news lately, which could drive the stock back up to those levels.
The company is also an active agent in its success. It has taken its operations to the cloud in response to the coronavirus. It's also been making more of a direct marketing effort with apps and promos rather than relying on organic search.
The move to the cloud was one of several initiatives by Expedia to lean out its operation. As a result, the company has been able to save $500 million during the pandemic.
This stock is still below a 52-week high of $139. This bodes well for the stock as long as people are looking for places to stay outside of their own homes.
Three Stocks Even Better Than EXPE
Chief Investment Strategist Shah Gilani just held his first-ever stock-picking lightning round event - running through more than 50 stocks to tell you if they are stocks to buy or stocks to sell.
Dozens are overpriced and overhyped - you should ditch them ASAP.
But Shah says THESE three stocks are "screaming buys."
All three are trading at a discount... they're under-the-radar companies most people haven't even heard of... and they have massive tailwinds ready to send their share prices into the stratosphere.
To get the company names, tickers, and price targets for Shah's picks, go here now.
Follow Money Morning on Facebook and Twitter.
About the Author
Mike Stenger, Associate Editor for Money Morning at Money Map Press, graduated from the Perdue School of Business at Salisbury University. He has combined his degree in Economics with an interest in emerging technologies by finding where tech and finance overlap. Today, he studies the cybersecurity sector, AI, streaming, and the Cloud.