In this article, I evaluated Airbnb, Inc. (ABNB) and The Marcus Corporation (MCS) to analyze the best travel stock. After thoroughly evaluating these stocks, I think MCS might be a superior choice for the reasons discussed in this article.
The global travel and tourism industry has been thriving and is directly impacting the hotel industry. This growth is encouraging the use of hotels along with resorts among consumers, thus driving overall growth. Moreover, the booming interest in resorts to flush out the stress associated with work and pressure is leading to growing usage of resorts, thus driving the growth.
The global hotels and resorts market is expected to grow at a CAGR of 17.4% until 2030.
PwC has projected the full-year occupancy of U.S. hotels to reach 63% this year, rising 0.7 percentage points year-over-year. The full-year average daily rate is expected to rise 4.5% year-over-year to $155.92 this year, up from the previous projection of $155.21. Also, it expects full-year RevPAR to come in at $98.25, rising 5.2% year-over-year.
ABNB gained 19.6% over the past month compared to MCS’s 7.8% decline. The stock has also gained 21.8% over the past six months compared to MCS’s 12.5% decline.
However, here are the reasons why I think MCS might perform better in the near term:
Recent Developments
On November 13, 2023, MCS announced that it would be relocating and expanding its corporate and divisional headquarters to the Associated Bank River Center located at 111 East Kilbourn Avenue in Milwaukee. The company would move to its new location in late spring or early summer 2024.
Recent Financial Results
MCS’ total revenue for the fiscal third quarter that ended September 28, 2023, increased 13.7% year-over-year to $208.77 million, while its operating income increased 133.9% over the prior-year quarter to $20.93 million. Also, its net earnings rose 272% year-over-year to $12.23 million, while its earnings per common share stood at $0.32, representing an increase of 220% year-over-year. In addition, its adjusted EBITDA increased 51.9% over the prior-year quarter to $42.33 million.
On the contrary, ABNB’s revenue for the fiscal third quarter that ended September 30, 2023, increased 17.8% year-over-year to $3.40 billion. Its income from operations rose 24.4% year-over-year to $1.50 billion. Additionally, the company’s net income and EPS attributable to Class A and Class B common stockholders improved 260.3% and 270.4% from previous year value to $4.38 billion and $6.63, respectively. However, its total costs and expenses increased 13.1% year-over-year to $1.90 billion.
Past And Expected Financial Performance
Over the past three years, ABNB’s revenue gained at a 38.4% CAGR. Analysts expect ABNB’s revenue to increase by 11.4% in the year ending December 2024 and 13.4% in the fourth quarter ending December 2023. However, its EPS is expected to decline 47.7% in the year ending December 2024 but increase 36.5% over the fiscal fourth quarter (ending December 2023).
Conversely, MCS’s revenue has increased at a CAGR of 21.7% over the past three years. Its revenue is expected to increase 6.7% in the fiscal year ending December 2023 and 2.1% in the fiscal first quarter ending March 2024. Its EPS is expected to rise 66.7% in the fiscal fourth quarter ending December 2023 and 21% in the fiscal first quarter ending March 2024.
Valuation
ABNB’s forward EV/EBITDA multiple of 23.02 is higher than MCS’s 7.69. ABNB’s forward EV/Sales multiple of 8.27x is higher than MCS’s 1.10x.
Thus, MCS is more affordable.
Profitability
ABNB’s trailing-12-month asset turnover ratio of negative 0.51x is lower than MCS’s 0.64x. In addition, ABNB’s trailing-12-month CAPEX/Sales of 0.40% is lower than MCS’s 5.08%.
Thus, MCS is more profitable.
POWR Ratings
ABNB has an overall rating of C, which equates to a Neutral in our proprietary POWR Ratings system. Conversely, MCS has an overall rating of B, translating to Buy. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. ABNB has a C grade for Value. Its forward EV/Sales of 8.27x is 588.8% higher than the industry average of 1.20x. Its forward P/S multiple of 9.15 is 940.6% higher than the industry average of 0.88.
In contrast, MCS has a B grade for Value. MCS’s forward EV/Sales of 1.10x is 38.5% lower than the industry average of 1.79x. Its forward P/S multiple of 0.62 is 45.4% lower than the industry average of 1.13.
Among the 20 stocks in the in the Travel - Hotels/Resorts industry, ABNB is ranked #10, while MCS is ranked #5.
Beyond what we’ve stated above, we have also rated both stocks for Stability, Momentum, Quality, and Sentiment. Get all ABNB ratings here. Click here to view MCS ratings.
The Winner
The travel industry is seeing steady growth due to robust demand for leisure travel and growing consumer spending. Industry players such as ABNB and MCS are well-positioned to benefit from these industry tailwinds.
However, MCS’s higher profitability and lower valuation multiples makes it the better buy here.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Travel - Hotels/Resorts industry here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
MCS shares were trading at $14.26 per share on Monday morning, up $0.19 (+1.35%). Year-to-date, MCS has gained 0.68%, versus a 21.79% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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