Traveling has long been many people’s favorite way to spend their leisure time. Whether going to popular tourist destinations with friends or visiting loved ones across the country, traveling is many people’s favorite thing to look toward during a summer vacation. Considering the timing, investors might want to look into travel stocks.
The travel industry has rebounded from the lows during the pandemic, so many might believe that now is a great time to buy travel stocks. However, there are still reasons to believe that they are vulnerable to uncontrollable events, and investors should be extra cautious about buying them.
For instance, the recent global tech outage proves this, as it essentially froze all the airports and flight schedules, which are critical parts of travel plans.
Below are the three worst travel stocks; investors should get money out of these travel stocks by 2024.
Southwest Airlines (LUV)
As its name suggests, Southwest Airlines (NYSE:LUV) primarily operates in the Southwest region of the United States. The low-cost airline initially began as a carrier that connected Dallas, Houston, and San Antonio in the 1970s but has now expanded nationwide.
One of the main problems with Southwest is that it only operates in the problematic Boeing 737 aircraft. In fact, it is the largest operator of Boeing 737 in the world. Southwest Airlines singularly counts on the Boeing 737 aircraft, responsible for more than 530 accidents and incidents, causing 5,779 fatalities. Moreover, the airline is notorious for its overbooking strategy, exposing it on several occasions.
Southwest is on thin ice with an aircraft maker that is simply too dangerous to trust. There are so many ways the company can lose investors’ trust. Investors should exit their positions in Southwest as soon as possible.
TripAdvisor (TRIP)
TripAdvisor (NASDAQ:TRIP) provides services in online travel booking. It specializes in planning trips as it helps customers compare different hotels, flights, restaurants, vacation rentals, and many more. However, the future of TripAdvisor is not so bright, especially considering the recent global tech outage, which will not only have a direct impact on the company’s near future performance but also prove that it is free from large outage problems due to the interconnectedness of the service it provides.
First, the travel guidance provider has not delivered good financial returns to investors. Even though its losses have narrowed compared to the previous quarter, TripAdvisor reported a net loss of $59 million in the first quarter of 2024. Additionally, just a few months ago, TripAdvisor was in a potential acquisition conversation with Apollo Global Management, a major player in the travel industry. However, this failed deal was a major disappointment to its investors. As TripAdvisor is facing growing competition and losing its grip and competitiveness in the online travel service market, now should be a time for investors to sell the stock.
Spirit Airlines (SAVE)
Spirit Airlines (NYSE:SAVE) is another low-cost airline mainly operating in the United States. The stock has already been down more than 80% since the beginning of the year, and there is not much upside potential with Spirit.
In recent financial reports, Spirit Airlines has been delivering bad news to its investors. In the 2024 first-quarter earnings, Spirit reported a 6.2% revenue decline year over year. However, the main issue with Spirit is that its business model is simply not profitable. Spirit has only had one year with a positive free cash flow in the past ten years.
According to analysts from Citigroup, Spirit Airlines is expected to have negative earnings, citing the airline’s worrisome negative cash flow and increasing debt. Furthermore, seven out of nine Wall Street analysts gave Spirit a sell rating, while no one gave it a buy. The predicted average price target is 8.24% below its current price.
On the date of publication, Andy Kim did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.