The 3 Most Undervalued Travel Stocks to Buy in September 2023

Stocks to buy

Travel stocks have embarked on a remarkable journey in recent times, one that investors are keenly following. With the travel industry slowly regaining its footing after the turbulence of the past couple of years, discerning investors are eyeing opportunities in the market. In this article, we’ll delve into the realm of travel stocks. We focus on uncovering promising options for those looking to make savvy investments. You can expect more of the same here.

The appeal of travel stocks, particularly undervalued ones, lies in their potential for robust growth as the world gradually reopens. The pandemic-induced slump hit the sector hard, leaving some gems undervalued and overlooked. These underrated travel stocks offer a unique chance to enter the market at a favorable price point.

Amidst the plethora of options, investors should focus on travel stocks showing strong fundamentals, a resilient business model and adaptability to the evolving travel landscape. These qualities will serve as a solid foundation for potential long-term gains. Let’s explore some of these hidden gems in the travel industry and the factors that make them stand out.

Investors scouting for opportunities in the travel sector will find these stocks enticing, backed by positive industry connotations and the promise of future growth.

Southwest Airlines (LUV)

Southwest airplane

Southwest Airlines (NYSE:LUV) is traversing a turbulent year, with its stock showing a year-to-date return of -11.23%. The topsy-turvy nature of its sojourn this year mirrors the quality of its recent financials.

In the second quarter of 2023, Southwest Airlines kicked things up a notch with a 4.59% surge in revenue, reaching an impressive $7.04 billion. However, they encountered turbulence as net income experienced a 10.13% dip, settling at $683 million. Ouch! Furthermore, operating income took a significant nosedive, plummeting by 31.35% to $795 million.

Regarding earnings per share, Southwest Airlines slightly botched the landing at $1.08, just below expectations. On a brighter note, revenue slightly exceeded expectations.

These results reflect the challenges Southwest Airlines faces, like many in the travel industry, due to rising fuel costs and other disruptions.

Against this backdrop, it’s important to consider the broader travel industry landscape. Travel stocks, including airlines, have faced uncertainties such as labor disputes and fuel cost pressures. Bank of America (NYSE:BAC) has taken a cautious stance on airline stocks in light of these challenges. However, Southwest Airlines’ recent tentative agreement with Transport Workers Union Local 555 is positive for labor relations within the company.

While short-term caution is advised, long-term investors looking for undervalued travel stocks may find Southwest Airlines intriguing. It continues to navigate these headwinds and position itself on a bright note for the future.

In summary, Southwest Airlines presents a mixed picture. On the one hand, it is certainly facing headwinds. However, it is worth considering as a long-term pick as it works through these industry-wide issues.

Walt Disney (DIS)

Source: Shutterstock

Walt Disney (NYSE:DIS) has been on a rollercoaster ride in the past six months, with its stock experiencing a 10% slump. However, with a dazzling display of financial resilience amidst turbulent market waters, the media juggernaut Disney unveiled its latest earnings report, replete with riveting revelations. Despite a battlefield of adversity, Disney defied the odds, boasting a splendid 3.84% year-over-year (YoY) surge in revenue, an astounding $22.33 billion spectacle! However, not every scene in this financial epic was filled with triumph. Alas, the company’s net income unveiled a dramatic twist, plunging to a staggering -$460 million, marking a harrowing plummet of 132.65%.

The diluted earnings per share also mirrored this decline, standing at -$0.25, down by 132.47%. These figures translate to a net profit margin of -2.06%, showing a decrease of 131.45%. On a more positive note, Disney’s net change in cash surged by $1.06 billion, a remarkable 437.58% improvement.

In light of these financials, Disney surpassed analysts’ expectations, beating EPS estimates by an impressive 6.1%. The reported EPS of $1.03 outshone the expected $0.97. However, the company fell slightly short on revenue, with reported figures of $22.33 billion compared to the expected $22.53 billion, resulting in a minor surprise of -0.89%. These recent developments come amidst rumors of potential changes within Disney. These include discussions about selling ABC networks and a recent Disney/Charter deal. A potential agreement could significantly impact Disney+, ESPN, and the broader pay-TV landscape.

As investors ponder the future of this iconic entertainment giant, it’s clear that Disney faces both challenges and opportunities. Travel stocks have their own unique dynamics to consider, making Disney an intriguing option in the broader context of undervalued travel stocks. While Disney’s recent financials show a mix of positive and negative signals, it will be fascinating to see how the company navigates these waters and adapts to the ever-changing media and travel industry landscapes.

Tripadvisor (TRIP)

image of mobile phone screen displaying tripadvisor logo (TRIP)

Source: Tero Vesalainen / Shutterstock.com

Tripadvisor (NASDAQ:TRIP) has navigated a challenging year, with year-to-date returns showing approximately 13.9% decline. However, keen investors are finding reasons to consider this travel stock, and here’s why. In June 2023, Tripadvisor reported revenues of $494 million, reflecting an impressive YoY growth of 18%. While net income did experience a dip of 23% to $24 million, the company maintained a steady net profit margin of 4.86%, indicating resilience despite industry headwinds. Operating income decreased by 30.2%, landing at $44 million.

One noteworthy aspect is Tripadvisor’s commitment to enhancing its experiences and dining segment, which could be a growth catalyst in the travel industry. There is anticipation of potential collaboration amid recent discussions between Tripadvisor’s Chief Executive Officer (CEO) Matt Goldberg and Google/Alphabet (NASDAQ:GOOG)/(NASDAQ:GOOGL). This partnership, if realized, could open new doors for Tripadvisor. However, investors should consider rising costs as the company pursues its growth strategies. The recent earnings report revealed a miss in diluted EPS (-8.1%) and a revenue beat (+4.3%). However, Tripadvisor’s potential as an undervalued travel stock for 2023 is worth considering, especially for those seeking unique opportunities in the sector.

On the publication date, Faizan Farooque did not hold (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.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.

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