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MM’s view on tourism stocks

Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.

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MM’s view on tourism stocks

Thank you for a very useful webinar covering the macroeconomics and individual stocks. Your comments are helpful as always. However, there is a segment of the stocks that has not been touched for a while. Do you have a positive view on the tourism industry with the travelling seemingly increasing but airlines are discounting airfares? What about individual stocks related to tourism, like HLO, WEB, & QAN etc. Kind regards Gregory

Answer

Hi Gregory,

The best adjective to describe our view towards tourism is “cautious”. Recently we have witnessed a wave of downgrades across the Australian Retail Sector as the consumer feels the pinch of high inflation and now as you say airlines are discounting flights, i.e. not a great backdrop towards the sector. Below is a snapshot view of the 3 stocks you mentioned:

Helloworld Travel (HLO) –  this corporate travel business has struggled over recent weeks and the next 10% feels more likely down towards $2 – we have no interest at this point.

Webjet (WEB) – has become our preferred stock in the sector, the risk/reward will look interesting ~$8. The potential move to demerge their B2B segment WebBeds with their B2C operation we think will create value for shareholders.

QANTAS (QAN) – with airfares turning lower QAN isn’t exciting above $6, while we think their focus over the coming years will place fleet renewal and customer satisfaction higher up the agenda, which in the shorter term at least, will be a the detriment of shareholder returns – we are neutral for now.

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Webjet (WEB)
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