Travel stocks will rebound and stay-home stocks will fall when Covid-19 ends
As travel industry executives promote the rapid resurgence of tourism and entertainment, the pandemic stock portfolio is turned upside down.
Airline stocks rallied along with online booking sites, ridesharing and Airbnb after earnings reports showed clear signs of a recovery in travel. At the same time, stay-at-home stocks are falling as borders reopen and health experts warn that an end to the Covid-19 pandemic could come sooner than expected.
“We’ve seen it everywhere,” Expedia CEO Peter Kern told analysts on a conference call Thursday after his company reported a 97% year-over-year revenue increase. “Cities attract. International has attracted. Practically every area has grown.”
Expedia shares rose 16% on Friday and rival Booking Holdings rose over 7%. Airbnb was up 13% and ended its best week since going public late last year after the home sharing company reported better-than-expected sales and a 280% increase in profits.
The airlines are finally back. Delta had its best week in about a year, up 13% as the US prepares to lift international travel bans. American Airlines is up 14% and Southwest Airlines is up more than 10% this week.
The general travel rally followed an announcement from Pfizer on Friday that its Covid-19 pill, when combined with a popular HIV drug, reduced the risk of hospitalization or death in exposed high-risk adults by 89% to the virus. Dr. Scott Gottlieb, a board member at Pfizer, told CNBC’s “Squawk Box” that Covid-19 in the US could end by early January when President Biden’s mandate for workplace vaccines goes into effect.
“These mandates, which will be introduced by January 4th, really come at the end of this pandemic,” said Gottlieb, who is also a former commissioner for the Food and Drug Administration.
Meanwhile, Peloton had its worst day on the market since the home workout company’s IPO in 2019. Peloton reported an unexpectedly high quarterly loss late Thursday as it coped with dwindling demand from gym reopenings and supply chain restrictions.
Peloton stock fell 35% on Friday, to its lowest level since June 2020.
“We anticipated fiscal 2022 would be a very difficult year given the unusual comparisons to the previous year, demand uncertainty amid re-opening economies, and widespread supply chain constraints and raw material cost pressures,” said Chief Executive Officer John Foley in a letter to the shareholders.
During an all-hands meeting on Friday, Peloton has stopped hiring employees in all departments with immediate effect, CNBC has learned.
Netflix may not be as dramatic as Peloton’s slump, but it’s down 6.5% this week, its worst surge since April for the streaming video company. Zoom, the video chat company that headed everyone’s pandemic portfolio when sales rose 326% in 2020, fell over 6% on Friday. Grocery delivery company Doordash, which became a household name last year, fell more than 4%.
Workers returning to the office and consumers returning to cinemas, concerts, and restaurants could well be trouble for Netflix, Zoom, Doordash, and other home-staying companies. To get from place to place, people need amusement rides, which explains why investors are switching to Uber and Lyft.
On Thursday, Uber reported revenue growth of 72% year over year, with the number of active mobility drivers increasing nearly 60%. Lyft, which has also invested millions in incentives, said drivers are coming back. Lyft shares rose 17% and Uber nearly 8% this week.
Uber CEO Dara Khosrowshahi said on the company’s conference call that some of the supply and demand challenges encountered during the pandemic are resolving on their own. Incidents of price hikes have been cut in half and wait times averaged less than five minutes, he said.
“The recovery is unmistakable,” Khosrowshahi told CNBC’s “Squawk Box” on Friday, adding that both airport and business travel are returning, although the extent of the recovery varies by geography. “The human condition of wanting to move, to travel, to go out of the house applies to everyone and is universal.”
Broadway shows reopened in September while movie ticket sales rose and theaters and concert halls opened their doors. Live Nation Entertainment stocks rose 15% on Friday after the company reported strong third-quarter earnings and Eventbrite rose more than 5%.
“Live music was rushing again last quarter,” said Michael Rapino, CEO of Live Nation, on the company’s conference call. Rapino said that ticket sales for major festivals were up 10% in the quarter compared to 2019, and said that “many of our festivals sold out in record time”.
SEE: The industry has a lot of catching up to do in entertainment