Shares of travel-related stocks got a boost Thursday on fresh comments that the government was committed to stabilizing the airline sector, and optimism that economic activity could begin to normalize as soon as May.
Shares of Sabre (SABR 5.18%), which makes most of its money off of the airlines, climbed nearly 20% on Thursday, while auto rental specialists Avis Budget Group (CAR 6.03%) and Hertz Global Holdings (HTZG.Q) jumped as high as 21% and 15%, respectively. Travel-related businesses including Tripadvisor (TRIP 5.57%) and Expedia Group (EXPE 8.85%) also got a lift, with each company topping out at about 9% mid-day.
The stocks all fell back some as the day went on, following the trend of the broader market, but clearly after weeks of selling there is a fresh sense of optimism surrounding the travel sector.
These companies are in different parts of the travel business, but all of them need normal travel patterns and healthy airlines to thrive. Sabre, a one-time subsidiary of American Airlines Group, runs the internal reservation and ticketing operations for a number of airlines, while Tripadvisor and Expedia make their money off of consumers planning trips. Avis Budget and Hertz provide autos upon arrival.
The stocks on Thursday were climbing alongside airline shares, which got a lift from comments made by Treasury Secretary Steven Mnuchin that assistance for the airlines was a top priority. Mnuchin also said the White House could begin to restart the economy as soon as May if there's ample evidence that the worst of the pandemic is behind us.
The rallies are modest compared to how far these stocks have fallen year to date: TripAdvisor is the best performer in 2020, down "only" 39.9%, while Sabre is off 68%. But after a miserable March dominated by panic-selling, even a hint of optimism is a refreshing change in sentiment for these travel shares.
Investors should be mindful that the hopeful tone reflected in the stock prices has gotten ahead of the results on the ground. The pandemic is still taking hundreds of lives daily in the U.S., and much of the U.S. economy is expected to remain in shelter-in-place mode for a minimum of weeks to come. As we emerge from the crisis it is difficult to think the economy will rebound immediately, and hard to imagine a huge surge of vacationers making last-minute summer plans.
The odds are improving by the day that the airlines will survive this crisis, which is good news for the massive number of ancillary travel companies that coexist alongside air carriers. But the recovery is likely to be slow and uneven, and there is nothing to say the March sell-off won't be repeated if the pandemic takes a turn for the worse or we see further signs the economy has collapsed.
It's just as important for investors to remain grounded during rallies as it was not to panic during the sell-off.