Funviralpark But as always, there are bright spots for investors to watch, and Morgan Stanley analysts are quick to point them out. In a recent memo, travel and leisure industry expert Ravi Shanker pointed out the headwinds of the past few years and explained why next year will be better. Shankar said 2023 could be the year of ‘Goldilocks’ for US Airlines if market conditions are ‘just right’. 2020 and 2021 were “too cold” due to the lingering pandemic, and 2022 was “too hot” due to stagnant demand and inflation.
We can take advantage of our stance on travel and leisure stocks by looking at two of Morgan Stanley’s 2023 “top picks.” Both stand out in the travel and leisure sector, and both offer a combination of strong buy valuations and healthy gains. next year. Below are details from the TipRanks database and comments from Morgan Stanley analysts.
delta airlines (Dar)
First, Delta Air Lines has been a longtime blue chip and one of the leading legacy carriers in the industry. Operating from its primary hub in Atlanta, Georgia, Delta operates approximately 4,000 daily flights to more than 275 destinations worldwide, including more than 500 weekly flights to Europe. With a market capitalization above his $21 billion and annual revenues of about $29 billion, the company is well-financed.
It was clear from the quarterly results for the third quarter of 2022. Delta reported his second straight quarter of profit, with adjusted EPS of $1.51, well above $1.44 in the second quarter and $0.30 in the same period last year.
On the top line, revenue hit $13.97 billion and the company had operating cash flow of 869 million. These solid results were driven by a combination of a surge in summer travel and higher fares. The company reports that travel on European routes has performed particularly well.
The company is optimistic about these results, despite being hampered by higher fuel costs this year, and believes it can reach its 2024 targets of $7 adjusted EPS and $4 billion in free cash flow. showed. Note that while DAL is down about 17% year-to-date, the stock is up 13% since its third-quarter earnings release.
Morgan Stanley’s Ravi Shankar is optimistic about Delta’s outlook following the company’s recent analyst day. DAL’s 2023 and his 2024 guides far outstrip consensus, fueling the 2023 airline bull market, but more importantly management. We argue that the tailwind is structural rather than temporary, resulting in higher profitability for LT.”
In line with these comments, Shanker is Overweight DAL with a one-year price target of $65. (To see Shankar’s achievements, click here.)
The blue-chip airline stock features 13 recent analyst reviews, 12 of which are 12 against Hold, giving it a strong buy consensus rating. At $33.16, the stock has an average price target of $47.85, suggesting a 44% gain over the year. (See Delta stock predictions on TipRanks.)
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Hyatt Hotels Corporation (H.)
Next up is Chicago-based hotel and resort giant Hyatt Hotels. The company’s portfolio includes over 1,200 hotels, including name brands such as Park His Hyatt, Grand His Hyatt and Hyatt Regency.
The hotel industry was hit hard by COVID in 2020, but Hyatt’s quarterly earnings have rebounded significantly after bottoming out in the spring of the year, with the company recording its ninth straight quarter of revenue growth. doing. His most recent topline report for the third quarter of 2022 was $1.54 billion, up 80% year-over-year and beating Street’s forecast by 3%.
At the same time, adjusted diluted EPS fell from $2.31 to $0.64. The EPS numbers dropped significantly, but beat expectations and more than doubled his forecast of 26 cents.
Hyatt has returned capital to investors this year through its stock repurchase program, repurchasing $290 million worth of common stock in the first 10 months of the year. The company’s buybacks during the third quarter totaled $162 million, or his 1.87 million shares. Hyatt’s current repurchase authorization amount remains approximately $638 million.
Morgan Stanley’s Stephen Grambling called Hyatt a “top pick” and pointed to several factors that would attract investors. Hyatt continues to sell properties it owns and leases. We believe this is advantageous as it makes the overall business less cyclical and less capital intensive. Hyatt has the largest exposure to group travel (27%) and continues to trend. Below pre-COVID levels… we see Hyatt as the biggest beneficiary as business travel continues to recover. ”
Going forward, Grambling uses his comments to corroborate Overweight (Buy)’s valuation, with his $136 price target showing a potential share gain of 49%. (To see the achievements of Grambling, click here.)
Nine analysts have reviewed Hyatt’s outlook over the past three months. These breakdowns are 7-2 for him in favor of buys over holds, indicating Strong’s consensus rating for his buys. Based on a trade price of $91.09 and an average price target of $108.5, the average upside potential is 19%. (See Hyatt stock predictions on TipRanks.)
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Disclaimer: The opinions expressed in this article are those of the featured analyst only. This content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
