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Stock Analysis & Ideas

Recreational Stocks are Rallying. Will the Rise Continue?

Story Highlights

The easing of inflation and a decline in gas prices sent recreational stocks higher. However, given the recent rally and the uncertain economic environment, the upside in recreational stocks remains capped.

Positive economic signals, including easing inflation (it dropped to 8.5% in July from 9.1% in June) and a decline in gas prices, sent recreational stocks higher. For context, shares of Hyatt Hotels (NYSE:H), Walt Disney (NYSE:DIS), and Booking Holdings (NASDAQ:BKNG) increased by about 12%, 17%, and 10%, respectively, so far in August. Furthermore, in one month, Hyatt, Disney, and Booking.com stocks climbed approximately 26%, 35%, and 27%, respectively. However, an uncertain macro trajectory could stall the rally. 

Against this backdrop, let’s understand what’s on the horizon for these recreational stocks. 

Hyatt Stock has been Recovering

Hyatt is benefitting from a broad-based recovery in demand both geographically and segment-wise. Easing travel measures, reopening of international borders, and declining COVID cases support the recovery in demand. However, given the uncertainty around macro headwinds, analysts are cautiously optimistic about Hyatt stock.

It’s worth mentioning that Hyatt delivered solid total fee revenue in Q2, which more than doubled from last year and reached record levels. Further, its CEO, Mark S. Hoplamazian, remains optimistic as strong booking trends continued in July. 

Barclays analyst Brandt Montour, who is bullish on Hyatt stock, stated that easing macro headwinds would drive demand for hotels, casinos, and cruise lines. However, unlike Montour, most Wall Street analysts maintain a Neutral stance on Hyatt stock as a deterioration in macro conditions could impact Hyatt’s performance and stock price. 

Is H Stock a Buy?

Hyatt stock has received three Buy and Six Hold recommendations for a Moderate Buy rating consensus. Further, Hyatt stock price prediction on TipRanks shows limited upside. Analysts’ average price target of $94 implies 1.4% upside potential. 

Disney Theme Parks Going Strong

Disney delivered a stellar performance in the first nine months of the current fiscal year. Further, its revenue and EPS jumped 26% and 36% during the last reported quarter. 

Disney’s strong performance comes on the back of ongoing momentum in its theme parks business. It’s worth mentioning that revenues at Disney’s DPEP (Disney Parks, Experiences, and Products) segment have surged 92% in the first nine months of FY22.

In response to Disney’s recent quarterly results, Rosenblatt Securities analyst Barton Crockett stated that Disney’s solid Q3 beat was due to the strength in the domestic park business, “which drove the DPEP segment sales up 70% Y/Y to $7.4 billion and operating profit up 514% Y/Y to $2.2 billion, 14% and 41%, respectively, above our projections.”

Crockett retained a Buy on DIS stock and increased his price target to $140 (12.7% upside potential) from $124. 

Is Disney a Good Stock to Buy?

Many analysts consider Disney a good stock to buy. Including Crockett, 17 analysts have rated DIS stock a Buy. Meanwhile, four analysts have a Hold recommendation. Overall, DIS stock sports a Strong Buy rating consensus on TipRanks. However, due to the recent spike, DIS price target of $138.80 implies 11.7% upside potential. 

Booking Holdings Stock Fairly Valued, Says Analyst 

Booking Holdings delivered impressive financial and operating numbers for Q2. However, Wells Fargo analyst Brian Fitzgerald believes BKNG stock is fairly valued at current levels and sees a limited upside. 

Benefitting from the recovery in demand, BKNG’s gross travel bookings increased 57% year-over-year. Furthermore, room nights booked in Q2 jumped 56%. What stands out is that room nights for Q2 surpassed 2019 pre-COVID levels. BKNG’s CEO Glenn Fogel stated, “Both our room nights and gross bookings in Q2 were our company’s highest quarterly amounts ever for these metrics.” 

Fogel is optimistic that the momentum in business will likely be sustained in Q3. He added, “We expect record Q3 revenue and are very busy working with our customers and partners to help enable an extremely busy summer travel season.” 

In response to BKNG’s solid performance, Fitzgerald stated, “While we are generally encouraged by recovery trends (the July decel notwithstanding) and progress on non-accommodations products, we remain cautious on post-pandemic margin recovery and the sustainability of recent share gain momentum, and view shares as close to fairly valued at current levels.” 

Fitzgerald has a Hold recommendation on BKNG stock. Further, his price target of $2,300 implies 8% upside potential. 

Is Booking Stock a Good Investment?

Overall, Booking Holdings stock forecast on TipRanks shows that analysts are cautiously optimistic about its prospects. BKNG stock received 15 Buy and six Hold recommendations for a Moderate Buy rating consensus. Further, analysts’ average price target of $2,415.95 implies 13.4% upside potential. 

Bottom Line: Recreational Stocks’ Upside Remains Limited 

These recreational stocks have significantly appreciated in value over the past month. Easing macro pressure and a recovery in demand have driven their financial and operating performances. However, given the recent rally and uncertain macro trajectory, analysts’ price target reflects limited upside potential. 

Built with the help of TipRanks’ stock comparison tool, here is the summary of how these recreational stocks stack up on TipRanks’ valuable datasets.

Disclosure 

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