We recently compiled a list of the 13 Best Vacation Stocks to Buy Now. In this article, we are going to take a look at where Caesars Entertainment, Inc. (NASDAQ:CZR) stands against the other vacation stocks.
In early 2024, The World Travel & Tourism Council projected a strong year for travel & tourism, with the sector’s global economic contribution expected to touch an all-time high of $11.1 trillion. As per the global tourism body’s 2024 Economic Impact Research (EIR), travel & tourism should be able to contribute an additional $770 billion over its previous record. WTTC anticipates that ~142 countries, of the 185 analysed, are expected to outperform previous national records.
WTTC forecasts a strong future for the next decade, characterized by healthy growth and unmatched career opportunities. By 2034, the sector is expected to supercharge the global economy with a staggering $16 trillion, accounting for ~11.4% of the entire economic landscape.
Travel and Vacationing in 2024 and Beyond
In 2024, the travel sector continues to break boundaries. Mastercard Economics Institute expects that this momentum will continue, with consumers prioritizing meaningful experiences and earmarking more of their budgets to travel.
Apart from air travel, cruise vacationing saw extraordinary growth, outpacing 2019 records. Through 1Q 2024, the US travel story was characterized by contrasting outbound and inbound dynamics. By November 2022, the US travelers vacationing overseas (excluding Canada and Mexico) outpaced 2019 levels. As of March 2024, the US travel overseas stood at ~20% above that level.
In comparison, the visitor traffic arrivals in the US from abroad were ~6% below 2019 levels as of March 2024. At this pace, the Economics Institute estimated that foreign passenger traffic in the US is expected to surpass 2019 levels later in 2024.
As per the Conference Board survey of consumer attitudes and buying plans in the US, the data as of April 2024 demonstrates that around 1 in 5 of the survey respondents expect to travel internationally in the upcoming 6 months. This was the record high since the survey began in February 1967. During this similar time in 2020, only 1 in every 20 Americans wanted to travel.
Recent Trends in Vacations
A big trend for 2024 remains the preference for experiential traveling over traditional celebrations for achieving some milestones. A recent survey demonstrated that ~40% of respondents continue to plan vacations for celebrating milestone occasions in 2024. One major shift in travel trends is the concept of a journey as the final destination. While travelers are seeking rail journeys along with epic boat trips, some travelers are opting for extended stopovers in certain destinations. This helps in turning layovers into small vacations.
The Cruise Lines International Association expects that ~82% of those who have cruised are expected to cruise again. The vacation rental market has been pegged at US$99.6 billion in 2023 and should be able to compound at more than 3% between 2024 and 2032 (as per Global Market Insights). This is expected on the back of elevated demand from the younger generation as they seek unique and authentic travel experiences. Notably, millennials and Gen Z are prioritizing experiences rather than material possessions, resulting in an increased demand for engaging and authentic travel.
Therefore, growth in the vacation rental market should stem from the increased use of online booking platforms, advancements in AI-driven property management technology, and the adoption of remote working.
Our methodology
To list the 13 Best Vacation Stocks to Buy Now, we used the Finviz screener to compile a list of 20 stocks catering to relevant industries. We then ranked the stocks in ascending order of their hedge fund sentiment, as of Q2 2024, and chose the following 13 companies.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A general view of a luxury resort casino, surrounded by a beautiful landscape and illuminated at night.
Caesars Entertainment, Inc. (NASDAQ:CZR)
Number of Hedge Fund Holders: 54
Caesars Entertainment, Inc. (NASDAQ:CZR) owns and operates as a chain of resorts. It provides casino, poker, roulette, and other gaming facilities, and offers food and beverage services.
Caesars Entertainment, Inc. (NASDAQ:CZR) plans to leverage its national network via a loyalty program, which should encourage increased visitation to multiple properties. Given the strong push in online gaming, a healthy sportsbook, and a balanced casino business between Las Vegas and regional locations, Wall Street believes that the company is well-positioned for future growth. Caesars Entertainment, Inc. (NASDAQ:CZR has now focused on completing its capital expenditure cycle, reducing its debt, and buying back its stock.
Wall Street analysts believe that the company is expected to see strong performance and favorable gaming revenue in Las Vegas, courtesy of its strong pricing power in the market. There is optimism regarding its sports and iCasino segments, and the company anticipates a strong year-end finish. Caesars Entertainment, Inc. (NASDAQ:CZR) is also expecting a significant increase in FCF, which it plans to use for debt and leverage reduction.
The company released its 2Q 2024 financial results. On a consolidated basis, Caesars Entertainment, Inc. (NASDAQ:CZR) was able to generate $1 billion of Adjusted EBITDA. Its operating results demonstrate YoY growth in Adjusted EBITDA in its Las Vegas segment as a result of record same-store revenues, hotel occupancy, and Average Daily Rate (ADR).
The company is optimistic about 2H 2024 as a result of healthy operating trends in its Las Vegas and Caesars Digital segments. Moreover, anticipated openings of a permanent facility in Danville and its $430 million capital investment in the newly rebranded Caesars New Orleans property should also act as growth drivers. Analysts at JMP Securities upped their price objective on the shares of Caesars Entertainment, Inc. (NASDAQ:CZR) from $58.00 to $59.00, giving it a “Market outperform” rating on 22nd August. Insider Monkey’s 2Q 2024 data revealed that the company was in the portfolios of 54 hedge funds.
Baron Funds, an investment management company, released its second-quarter 2024 investor letter. Here is what the fund said:
“In the most recent quarter, we chose to lower the Fund’s large exposure to travel-related real estate companies and exited the Fund’s position in Caesars Entertainment, Inc. (NASDAQ:CZR), the largest casino-entertainment company in the U.S. and one of the world’s most diversified casino-entertainment providers.
We have near-term reservations about a possible moderation in consumer demand for some of Caesars’ properties and believe the move higher in interest rates and a largely quiet transaction market also negatively impact certain highly leveraged companies such as Caesars. We are fans of CEO Tom Reeg and may revisit Caesars for purchase at a later date.”
Overall CZR ranks 2nd on our list of the best vacation stocks to buy. While we acknowledge the potential of CZR as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than CZR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
Hedge Fund Resource Center