These Travel Stocks Could Be Taking A Trip Higher

Hey Traders,

Like I talked about last week, travel stocks are looking like they may be one of the last remaining places to pick up some “reopening” upside.

As things start to go back to “normal,” people are ready to get the heck out of the house, and start moving around freely again.

Last week I talked about two airline stocks I’m looking at as things potential post-pandemic plays …

One of which was American Airlines (Ticker: AAL) …

And wouldn’t you know it … I closed out a trade on AAL in my Robinhood Trader program this week for a 56% win! 

AAL recently echoed fellow airline Delta’s (Ticker: DAL) promising booking status, stating that current booking demand is already at 90% of 2019, and the airline expects to exceed 2019 bookings as demand rises into the summer. 

Of course, AAL and DAL are hardly the only tickers getting ready to take a trip to the upside …

Let’s look from the skies to the sea … where cruise lines are starting to get their groove back.

Norwegian Cruise Line Holdings (Ticker: NCLH) is continuing to creep higher, but the shares are still sitting at just $32 … well below the $58-$59 mark it was cruising at before the pandemic sank its ship, so to speak …

Chart courtesy StockCharts

So we’re seeing some recovery, with plenty of upside potential …

And in the option pits, NCLH’s options are relatively cheap right now, with the stock touching a 52-week low at-the-money 30-day implied volatility (ATM IV) on Friday. 

Near-term at-the-money calls are trading for less than $1.30, but given that NCLH won’t start sailing from U.S. ports again until August, I’d like to look a little further out than that …

Could successful late summer and fall cruise bookings push NCLH back up near its former highs by the new year?

What about by January 2023, where at-the-money calls are selling for $9.25? The shares would have to climb above $41.75 to be profitable, but that’s still well below their pre-pandemic highs …

It’s a similar story with United Airlines (Ticker: UAL).

Like I mentioned above, DAL and AAL expect domestic travel this summer to exceed 2019 levels, in spite of recent rocky second-quarter forecasts. With the uptick in travel, I’m expecting airlines will eventually continue their upward trajectories … including UAL.

 Stock courtesy StockCharts

UAL shares have seen a significant recovery since the COVID crash, but they’re still flying well below their pre-pandemic levels. 

What’s more, not only is UAL off its 2019 highs, it’s still slightly off its 2021 highs, in spite of already reporting its domestic bookings have exceeded 2019.

Like NCLH, options are relatively cheap right now, with IV sitting at a 52-week low …

If UAL could even just reclaim its 2021 high by the upcoming July expiration (which could be questionable given the recent sideways action of the shares, but there’s still over a month for this to play out), there’s some call options to be found that could pay out quite well.

And of course, checking back in with DAL, I still see some potential upside there as well, though the shares don’t have quite as much room to run before hitting their pre-pandemic prices.

Although DAL (and AAL) recently hit some turbulence after shaky second-quarter guidance, they’re both continuing to forecast rising demand throughout the rest of the summer — and, presumably, beyond, which bodes well for continued recovery in the long-term.

Chart courtesy StockCharts

DAL also seems to have stalled out over the last several weeks, but that, coupled with year-low IV, may benefit options buyers with relatively cheap prices.

As reopening continues, these pockets of value will be harder and harder to come by, but for now I will continue watching travel stocks for potential bullish plays.

Your Only Option,

Mark Sebastian

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