Fears of growing coronavirus cases on the market today hit travel inventories such as Booking Holdings (NASDAQ: BKNG), MGM Resorts International (NYSE: MGM) and Marriott International (NASDAQ: MAR).
Over the weekend, new cases of COVID-19 in the US hit a record high of around 80,000 new infections on Friday, and cases in much of Europe continue to hit new highs, threatening large parts of the continent. Several Atlantic nations have begun blocking measures to control the spread. France enforces 9:00. Night time in most countries.
If the weather turns colder, investors appear fearful of another wave of the virus that epidemiologists have been warning about for months.
By 2:20 p.m. EDT, share orders were down 5.7 percent while MGM was down 5.8 percent and Marriott was down 5.8 percent. At the same time, the S&P 500 fell 2.2%.
The three stocks are exposed to the tourism industry in different ways, but are fundamentally dependent on travel for all of their businesses.
Booking Holdings, an online travel agency that also owns Priceline, Kayak, and Rentalcars.com, relies on Europe for most of its business, with Booking.com as the clear market leader. As a result, companies will be hard hit by the extensive blockade in Europe. Cases on the continent fell to minimal levels over the summer, but a second wave could affect results in the fourth quarter, including the holiday season, and in 2021.
Order revenue fell 84% in the second quarter, indicating the severe impact of the first block. As an online travel agent, booking fees are more flexible than other travel companies because most of the costs are related to marketing. It offers an advantage over badly affected sectors such as shipping lines and airlines, but still represents an operating loss of $ 484 million. Even after you’ve eliminated about 85% of your marketing budget.
MGM’s casino operator business is primarily focused on the Las Vegas market with resorts including Bellagio, Mandalay Bay, The Mirage and MGM Grand. And while the number of cases in Nevada is more moderate than some parts of the state, MGM is relying on tourism and business conventions that are likely to suffer longer if cases increase again. TSA data show that air traffic is recovering gradually. Last week the United States had its first day with more than 1 million passengers since March, but that trend could easily be reversed.
Revenues decreased 91% in the second quarter as Vegas casinos were closed for most of the period. However, recently the company focused on online gaming through BetMGM and received a $ 1 billion investment from IAC with at least one account identified. Investors believe the shares are underestimated.
After all, Marriott, the world’s largest hotel company, is also exposed to business travel and tourism, despite the fact that their properties are scattered all over the world. Even though most Marriott properties are franchisees, the company still faces major challenges as franchisee revenue declines.
Revenues fell 72 percent to $ 1.46 billion in the second quarter as employment rates fell. In addition to facing the challenges of COVID-19, Marriott is also at risk of disrupting home-sharing services such as Airbnb, which now has more rental space than Marriott and will be privately listed for an IPO in August, freeing up more capital for expansion. stand up. . Airbnb also appears to have weathered the pandemic better than the hotel industry, as they are taking advantage of the flexibility of its model.
All three stocks have fallen since the start of the year, but not as much as you might think. As the chart below shows, reservations are 15% while Marriott and MGM have lost about a third of their value.
It seems that this graph shows that if the next wave of the virus is worse than expected and creates a lockdown effect, this stock could fall further. We’ll learn more as the company reports earnings in the coming weeks.
MGM is in first place with the result on Thursday. Analysts expect sales to fall 63% to USD 1.23 billion and a loss of USD 1.01 per share. Even though the numbers both improved from the second quarter, projections still show MGM is in a deep hole.
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