Travel stocks in the eye of investor fear

Seemingly without rhyme or reason, some stocks have defied gravity today by witnessing higher share prices, amid a sea of deep red across the broader market.

On the back on no news, Lake Resources (ASX: LKE) was a flag bearer for the gainers at one point today, up 9.29% in early afternoon trade, while mid-cap diversified holding company Steamship Trading (ASX: SST) was up 6.79%, also on the back of what appears to be thin air.

Thereafter, gainers fall away sharply, with Boart Longyear (ASX: BLY), Emerald Resources (ASX: EMR) and Australian Clinical Labs (ASX: ACL) up between 1-2%.

While BNPL stocks Zip Co (ASX: ZIP) and Block Inc (ASX: SQ2) were down -19.05% and -18.50% in early afternoon trade, it’s the travel sector that has borne the brunt of investors’ inflation and recession fears.

Recovery story

Sold off heavily during the pandemic, the fortunes of travel stocks mirrored the post-pandemic recovery story.

While households are still sitting on a mountain of cash saved during covid, there’s growing fear that much of it will now go towards paying down considerably higher mortgages rather than discretionary travel.

Two hours out from the close, six stocks within the sector – Apollo Tourism and Leisure (ASX: ATL), Corporate Travel (ASX: CTD), Qantas (ASX: QAN), Webjet (ASX: WEB), Flight Centre (ASX: FLT) and Auckland International Airport (ASX: AIA) were all down mid-to-high single digits.

By comparison, the broader market (All Ords Index) was down -4.80%.

Rebound

Given the unanimously robust outlook for the sector, travel stocks could be amongst the first to rebound when market’s regain the confidence.

To put today’s travel sector falls into context, with the exception of Flight Centre, consensus has strong to moderate buys on all other five stocks.

Based on the broker coverage (as reported by FN Arena) these five stocks are currently trading with 15.4% to 44% upside to their target prices.

Flight Centre share price over 12 months.