Amid amplified concerns that the U.S. economy is slowing and that the Federal Reserve was too slow to lower interest rates (it hasn’t as of yet), some travel stocks are slumping. Those declines make sense because consumer cyclical names are often pinched in sluggish economic environments.
However, that recent weakness could eventually prove to be a buying opportunity. Some travel and leisure names still sport solid fundamentals. That could be an indication the ALPS Global Travel Beneficiaries ETF (JRNY ) could reward patient investors. While some holdings in the exchange traded fund have slumped of late, those declines may prove to be too severe. Overall travel demand in the U.S. remains sturdy.
Data confirms that’s been the case over the summer. Consumers may be looking for ways to dial back spending in other categories. However, many are still willing spend on experiences. JRNY leans into this theme, which may hold even as the economy cools.
Pockets of Opportunity in JRNY Roster
When it comes to experiences, cruises certainly fit the bill. Carnival (CCL) and Norwegian Cruise Line Holdings (NCLH), both of which are JRNY holdings, among Morningstar’s preferred travel equity ideas. The research firm estimates sales in the industry will rise 14% this year.
“With the industry operating at full occupancy, opportunities to improve Carnival’s profit margins should surface. These include increased scale, improved brand awareness via tactical marketing spending, and better profitability from its mix,” noted analyst Jamie Katz. “These factors should help increase adjusted EBITDA margins to around 27% at the end of our forecast, supported by low-single-digit price and cost growth. This is in line with the average EBITDA the company achieved in the five years ending in 2019.”
Morningstar is also constructive on Expedia (EXPE). One of the largest travel booking sites, Expedia is also a member of the JRNY roster.
“We believe Expedia shares are discounting the benefit of enduring travel demand and investments the company has made the past few years. We surmise these will drive expanding operating margins and ongoing sales growth while supporting the company’s network effect,” observed Morningstar’s Dan Wasiolek.
Examining other pockets of opportunity within JRNY, casino equities have recently been punished, but there’s insider buying occurring at MGM Resorts International (MGM). Additionally, some analysts argue that markets aren’t fully appreciating potential benefits that could accrue to Wynn Resorts (WYNN) when it opens its casino hotel in the United Arab Emirates (UAE) in early 2027. Caesars Entertainment (CZR), another JRNY holding, is paring debt, indicating it could be a beneficiary of lower interest rates.
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