Back in March, as the COVID-19 coronavirus pandemic started impacting the whole world, some of the businesses that took the biggest hit were travel stocks.
With cruise stocks diving after many initial outbreaks were centered on cruise ships, and airlines hammered after cancelling the majority of flights and laying off staff as borders closed worldwide, we wondered if it was the right time for a coronavirus travel stock play. After all, based on previous pandemics and global strife, there was a chance that companies had hit bottom and recovery was starting to pick up.
So how have travel stocks been faring?
The first question is when the “bottom” was hit for travel stocks. Across the board, March 18-20 served as the bottom for much of the markets as the pandemic worsened and economies started to shut down, and price charts for travel stocks show a bottom around the same date.
It’s upon examining the time since hitting bottom, however, that we start to see a difference in the recovery of airlines and cruise companies.
For cruise ships, the coronavirus hit much harder initially. Stocks of cruise operators like
Royal Caribbean Cruises Ltd. (
NYSE:RCL) and
Norwegian Cruise Line Holdings Ltd. (
NYSE:NCLH) dropped more than 85% from highs in February to lows in March, as they were hotbeds for some outbreaks and the sailing season was all but officially cancelled.
(One-year price chart for Royal Caribbean Cruises)
But by hitting a concrete bottom and needing government assistance from the get-go, cruise companies were the unexpected beneficiaries of early stimulus and recovery efforts. Since NCLH hit a low of USD $7.77 on Mar. 18,
shares have risen up more than 120% to USD $17.29. Though there’s much more recovery left for cruise operators in the long-run, the backing support makes the likelihood of a greater long-term recovery seem more promising that not.
Meanwhile, airlines faced a far different and more inconsistent battle. Initial drops for airline stocks were severe, but varied from a 73% drop on the high end to less than 50% on the low. As some borders remained open and some flights remained essential, it was tougher for the market to figure out just how negatively airlines would be affected.
(One-year price chart for Air Canada)
As the pandemic has worsened and lengthened, however, that picture has become clearer for all and darker for some. Airlines that hit a proper bottom like
Air Canada Inc. (
TSX:AC) and
United Airlines Holdings Inc. (
NASDAQ:UAL) have made partial recoveries of just above 35%, while those like
Southwest Airlines Company (
NYSE:LUV) and
Dela Air Lines Inc. (
NYSE:DAL) had further corrections before starting to recover.
For investors focused on a long-term investing strategy looking at market correction, travel stocks were a head-turning opportunity. So far, it seems like cruise plays have been the winning move, and moving forward will likely have less unexpected difficulties to work around.
But just as before, we’re talking about a long-term play that hasn’t been fully cleared up. The COVID-19 pandemic hasn’t stopped impacting the world after only a few months, and more market shake-ups could still be on the way.
Investing in a severely devalued stock and waiting out the storm is a historicaly winning move, but recovery also depends on how the company was doing beforehand. As always, do your due diligence and heed the correction investment experts by focusing on the long-term.
New to investing in stocks? Check out Stockhouse tips on the Best Stocks to Invest in.
For the latest info on hot investment sectors, check out the Trending News hub on Stockhouse.