Hotels, Resorts, & Cruise Lines
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ABNB $140
16 Feb 2023 |
Airbnb stock soars after its first fully profitable year
On 07 December 2022, just over two months ago, Morgan Stanley downgraded travel services company Airbnb (ABNB $140) and slashed its price target to $80 per share. The shares immediately fell 5% on the news, and we immediately added the company to the Penn Global Leaders Club. We didn’t buy into the analyst’s narrative, but we did buy into CEO Brian Chesky’s intelligent strategic vision for the company. Our initial price target for ABNB shares was $145. Ten weeks later, the shares have moved 54% above our purchase price, and we still consider them a bargain. The latest catalyst for the move higher was a stellar Q4 earnings report. Revenues rose 24%—to $1.9 billion—from the same period a year earlier, and profits came in nearly double what was expected ($0.48 vs $0.25). Most importantly, after losing $4.6 billion in 2020 (pandemic) and $300 million in 2021, the company just posted its first profitable year, bringing in $2 billion on $8.4 billion in revenue. That equates to an impressive 22.52% operating margin. While others (like Vrbo) enter the business and while the hotels try new tactics to emulate what Airbnb has created, Chesky’s company remains on the cutting edge of new technologies designed to increase its dominance in the space. Meanwhile, Airbnb sits on a $10 billion mountain of cash, a tiny relative debt load of $2 billion, and a demand backlog due to a record number of new bookings. Suddenly, the analysts are changing their tune. Even though the shares have run up to near our price target in a matter of months, our Global Leaders Club purchases are designed to be longer-term holdings. In other words, we prefer not to sell at our price target. Airbnb is the only travel-related company we currently own in the Club—the hotels remain a bit too expensive, and the cruise lines (we prefer Royal Caribbean and Norwegian) could be further affected by softening economic conditions. |
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ABNB $94
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Airbnb is trading in double-digits again; is the stock worth a look?
Despite pricing its initial public offering shares at $68, the typical Joe had to buy Airbnb (ABNB $94) shares on the open market back in December of 2020. For anyone who wanted to jump into this highly touted travel name at the open (like us), the price was steep: shares opened at $146 and remained in triple digits for over a year. Now, investors can get in for the “bargain price” of just $94 per share—36% cheaper than the opening-day price. But are the shares actually cheap? The company just had its “biggest and most profitable quarter ever,” with revenue of $2.9 billion and adjusted earnings of $1.5 billion. Gross bookings rose 31% in the quarter, beating estimates. Why, then, did ABNB shares plunge nearly 20% this week? It all revolves around guidance. For Q4, management expects revenue in the $1.85 billion range and growth of around 25%, “consistent with historical seasonality.” CEO Brian Chesky said the company is well positioned for the road ahead and has taken steps to reduce costs in preparation for a tougher economic environment. As with Powell’s comments on rate hikes, investors seemed to contort the words to paint a darker view of what’s to come. Hence, the major price drop. In its “Airbnb 2022 Summer Release,” the company announced a slew of enhancements which would amount to “the biggest change to Airbnb in a decade,” according to Chesky. From an enhanced app experience to new protections for both guests and hosts, these upgrades should keep the company well ahead of its competitors in the space. While they are being attacked from both sides—the online travel agencies (to include Booking and Expedia) and the major hotel chains (primarily Hilton and Marriott)—the $60 billion firm controls approximately one-fifth of the entire vacation rental market. Considering the value of that market is projected to exceed $100 billion within five years, simply maintaining their ratio would spell strong growth ahead for the company. Investors are not in the mood, however, to give any consumer discretionary name a benefit of the doubt right now. Shares have fallen 43% year to date. With its forward P/E of 32, Airbnb’s valuation remains richer than its online travel competitors and roughly in line with the major hotel chains. While we aren’t ready to add the company to a portfolio, the price seems to be at the upper end of the “fair” range. Should the shares fall closer to the IPO offering price of $68, we would almost certainly jump in. |
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CCL $9
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Morgan Stanley analyst: Carnival Cruise Lines could go to $0 in worst-case scenario
(29 Jun 2022) Every time we write about Carnival Corp (CCL $9), we begin with the disclaimer that we have disliked the company and its shares for some time. A year ago, we wrote about members of senior management talking up the company’s great growth prospects while simultaneously offloading their own shares—at a much higher price than they are today, we might add. CCL shares were selling for $19 at the time. Morgan Stanley analysts have apparently had enough as well. The company maintained its “underweight” rating on the stock (why not “sell”?) while lowering the price target to $7. This helped drive the stock down some 15% at the open, to under $9 per share. Even more disconcerting was the analyst’s bear case scenario for the cruise line: the price of the shares could possibly go to $0. The catalyst for that stunningly bearish call is, primarily, the company’s debt load. Carnival holds some $11 billion worth of short-term debt and $32 billion worth of long-term debt. It has a current market cap of $10 billion. Should an upcoming recession trigger another “demand shock,” it could spell the end of the line as the company would find it very difficult to secure even more funding (at higher rates, we might add). Not everyone is so bearish, however. Six of the 24 major analysts covering the stock have a “buy” rating on the shares. Count us in the Morgan Stanley camp. Both Royal Caribbean (RCL $36) and Norwegian Cruise Lines ($12) fell nearly double digits in sympathy with Carnival on Wednesday. For investors betting on a cruise line comeback, either of those names would offer a much better play on the industry in our opinion. (Penn does not own any cruise lines within the five portfolios.) |
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ABNB $195
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Airbnb prepares for "golden age of travel" with new tools built around the hybrid work environment
(10 Nov 2021) We fully planned to add shares of Airbnb (ABNB $195) to one of the Penn strategies on its long-anticipated IPO day. Alas, it shot out of the gate so quickly that we could not justify the rich valuation. The company has unarguably changed the travel landscape, with its platform boasting some 5.6 million active accommodation listings worldwide. While the major hotel chains have effectively fought back to avoid losing market share, and a number of competitors have since tried to replicate their business model, we remain bullish on the company's long-term strategy. To that end, the $124 billion travel/tech firm has announced the rollout of some 50 new features designed to take advantage of the new, post-covid world; a world in which remote work is no longer the exception, and a large percentage of travel has morphed into a business/leisure affair. The company is placing a greater focus on its customers who book long-term stays of four weeks or longer, as that is now its fastest-growing segment. The suite of new tools will include the ability to verify wi-fi speeds to assure an effective work environment, and a listings search which will now go out a year into the future. For hosts, Airbnb is rolling out AirCover, an insurance program which offers $1 million in both damage protection and liability coverage, as well as "deep-cleaning" protection. As for the company's third-quarter earnings, they were off the charts. Revenues came in at $2.24 billion versus $1.34 billion in the same quarter of 2020 (+67%), and profits rose 280% y/y for the quarter, to $834 million. The company gave bullish guidance for Q4, with expectations that the rosy projections will carry into 2022. Morningstar places the fair value of ABNB shares at $102. While that seems a bit low, a price floating around $200 per share is still too rich for us. Looking elsewhere in the industry, our favorite hotel chain—Hilton Worldwide (HLT)—also seems richly priced at $147 per share (1,200 P/E). Ditto online travel agency Booking Holdings (BKNG $2,641), with its 288 multiple. Our advice? Wait for the inevitable pullback in these travel names. |
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CCL
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Look who else is jumping ship from Carnival Cruise Lines: senior management
(26 Jan 2021) Admittedly, we have never liked Carnival Cruise Lines (CCL $19). With great cruise lines to choose from like Royal Caribbean (RCL) and Norwegian Cruise Line Holdings (NCLH), why would investors choose the K-Mart (simply our opinion) of operators? Even before the pandemic, the charts were reflecting our negative view of the company. Now, with CCL shares so cheap, wouldn't it be a great time for management to step up and buy shares in an effort to reaffirm their post-pandemic comeback plans? Apparently not. In the middle of January, CEO Arnold Donald sold 62,639 shares of his company at $21.12 per share, netting him a cool $1.3 million. On the same day, CFO David Bernstein shed 49,000 shares for a total of $1 million, and Arnaldo Perez, the company's general counsel, sold 14,215 shares for $300,000. No notable insider buying has taken place since the start of the year. When your CEO, CFO, and general counsel jump ship (or at least head for the nearest dinghy), it is hard to get too excited about the company's great comeback plan. We use insider buying and selling transactions as one metric to gauge where a company is headed, and how much confidence management has in its own strategic plans. While we use Simply Wall Street to locate this information, investors can find it on any number of sites free of charge. |
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ABNB
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We had every intention of buying Airbnb on its IPO—and then it priced
(11 Dec 2020) Sorry, but we have one more 1999 analogy. Granted, Airbnb (ABNB $139) is no pets.com (remember the hand puppet?), but what happened on the former's IPO day is insane. To be clear, we fully believe in Airbnb's business model, and have no doubt that it will be highly successful going forward—precisely why we expected to buy shares of the firm on day one. So, what happened? The IPO was finally priced at $68 per share. Of note: the CEO said he wanted the IPO price to reflect what he considered to be fair value of the company. When the stock finally began trading, its first price was $146, or 116% above what senior management considered fair value. There is a new breed of investor hitting the markets right now, and facts be damned; if they want a company because it has a cool name (Nikola comes to mind) they will pay any price to own it. How bad is it right now? Many investors complained that they didn't get the IPO price of $68, having no idea that it doesn't work that way. Want another example? There was a flurry of options action in ABB Ltd (ABB), an electrical equipment and parts maker based in Zurich, leading up to the ABNB IPO. It seems as though many "investors" thought they were buying calls on Airbnb. Let the red flags go up. When we were figuring where we might get the shares of the firm on day one, we initially thought $35 to $50 seemed reasonable, though $50 was stretching it. So, a company that was valued at $18 billion this summer now has a market cap of $150 billion. Like we say, insane. We're bummed that we don't own ABNB, but we expect to pick the shares up when they come crashing back to reality at some point in 2021. And that is not a slam against the company, it is a slam on the knuckleheads who bought in at $146 or higher (shares went up as high as $165 on day one). |
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ABNB
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Airbnb: the next big IPO investors need to consider owning
(20 Nov 2020) There are a handful of IPOs we get excited about each year. The last one was Palantir (PLTR $18), which is up 70% since we purchased it on the last day of September. The next one will be Airbnb, which will trade on the Nasdaq under the symbol ABNB. Understandably, the pandemic hammered the vacation rental company, with revenues in Q2 of this year plummeting 72% from the same quarter in 2019. What does that mean for investors? They can expect to pick up shares a lot cheaper than they could have were there no pandemic. Airbnb's model is sound; nothing about the global health disaster changed that, and we expect a full rebound by the company as vaccines and therapies come online. In fact, one could make the argument that travelers will feel safer in the type of single-unit rentals the company typically hosts, rather than the crowded lobbies of the major hotel chains. Expect ABNB to begin trading in mid-December with an immediate market cap of roughly $30 billion. Like Palantir, we will own ABNB shares within minutes of the first trade. |
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MGM
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Penn member MGM jumps on Barry Diller investment
(10 Aug 2020) We opened gaming and resort giant MGM (MGM $22) at $16 per share on 10 July within the Penn Global Leaders Club, and commented: "Did we really get it at that price?" Now, precisely one month later, our position is up 37%—helped along the way by Barry Diller's $1 billion investment in the firm. Shares were trading up around 15% on Monday after the InteractiveCorp (IAC $131) chairman said he was "energized and excited to make this investment in MGM." Why did an Internet media company want 12% ownership in the largest operator on the Las Vegas Strip? The new shareholder said that he believes his firm can help MGM expand its online gambling business and create other "digital first" experiences for guests. As for our price target, we're not quite there yet: we placed it at $32 per share, or 100% higher than our purchase price. Heading in the right direction. |
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WYNN
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Wynn's revenue fell a staggering 95% in Q2
(07 Aug 2020) The casinos, especially those with large exposure to Asia, could be considered the poster children for the pandemic, and the latest results from our favorite pick in the group, Wynn Resorts (WYNN $36-$77-$153) illustrate why. In the second quarter of 2019, Wynn generated $1.65 billion in revenues; in Q2 of this year, the company brought in just $85.7 million--gross. That is a staggering 95% reduction, all before the company paid one cent in expenses. As a matter of fact, net income in Q2 of 2019—$94.55 million—was higher than last quarter's gross revenues. In the first six months of the year, Wynn has lost over $1 billion. So, with WYNN shares being down nearly 50% ytd, doesn't that mean they will snap back as we slowly put the virus behind us? Perhaps, but there is one important factor investors need to be aware of: 76% of the company's revenues over the past four quarters emanated from operations in Macau. Talk about some serious geographic risk. Despite all the bluster coming from the state-run media in communist China, we believe that country is in serious economic trouble. The idea that it will simply resume its pre-pandemic growth trajectory over the coming months—or even years—is a fallacy. As for Wynn, we would value the shares at roughly $100, but the company's reliance on Macau as a revenue source has us steering clear. |
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NCLH
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Norwegian Cruise Line concerned about ability to remain in business
(05 May 2020) Last summer, in a scathing article on Carnival Cruise Lines (CCL) and its inept (our opinion) CEO, Arnold Donald, we made the comment that "while we don't own a cruise line, if we did it would probably be Norwegian...." At the time, Norwegian Cruise Line Holdings (NCLH $7-$13-$60) was trading for $52 per share and had a conservative multiple of 12. Fast forward eleven months and Norwegian's multiple has dropped to 3, its price has dropped to $13, its market cap has dropped from $12B to under $3B, and management is expressing real concern that the firm can stay in business. In a Tuesday securities filing, the Miami-based company admitted that their is "substantial doubt" about its ability to carry forward as a "going concern." Norwegian also said that it does not have enough cash to meet its short-term obligations. NCLH holds $730M in current assets and has $3.58B in current liabilities. We are changing our pick to Royal Caribbean Cruises LTD (RCL $19-$40-$135), though we wouldn't touch any company in the industry right now. |
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CCL
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Carnival sails up by nearly 25%, but that doesn't take much when your shares are $8 apiece. (06 Apr 2020) We've never been a fan of CEO Arnold Donald, so we have always steered clear of Carnival Corp (CCL $8-$10-$56), parent of the Carnival Cruise Lines. As if the company wasn't in dire-enough shape, the worst possible disaster struck the industry in the form of the pandemic. This week, however, after Saudi Arabia's sovereign wealth fund took an 8.2% stake (now 3rd-largest shareholder), shares soared nearly 25%—from $8 to roughly $10.50. Do the Saudis know something the rest of us don't? Doubtful. We look at Carnival and we see lackluster management, a grounded fleet for the foreseeable future, and short-term liabilities of $9 billion (versus s/t assets of $2 billion). With a beta of 2 (twice the risk of its benchmark), a crazy-high yield of 19% which will have to be slashed, and fierce (and well-run) competition, we stand by our "steer-clear" guidance. Think the cruise industry is so beaten up that it will spring back? Then take a look at Royal Caribbean Cruises LTD (RCL $29) or Norwegian Cruise Line Holdings LTD (NCLH $10)—two better-managed (our opinion) companies which have also seen their shares beaten down by this virus.
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CZR
ERI |
Eldorado Resorts' shareholders should be out with pitchforks searching for Carl Icahn. (30 Mar 2020) We are ambivalent with respect to hedge fund manager/corporate raider Carl Icahn. that being said, we despise him more often that we love him. In fact, his most endearing quality is his disdain for the smarmy Bill Ackman of Pershing Square. It is doubtful their two egos could fit in one room. That is enough of a backdrop for the following story. Last June we wrote of a forced marriage between two debt-laden companies, with Icahn holding the shotgun. Eldorado Resorts (ERI $6-$12-$71), which at the time had a market cap of $4 billion and long-term debt of $3 billion, wanted to acquire the larger Caesars Entertainment (CZR $3-$6-$15), which at the time had a market cap of $7 billion and long-term debt of $9 billion. Why on earth would anyone on the Caesars board ever go for such a harebrained scheme? It seems they agreed only at the "strong urging" of fellow board member Icahn, who would make out like a bandit in the deal. We called it financial engineering of the worst kind. Fast forward nine months. Eldorado is now a $923 million company, and Caesars has a market cap of $4.4 billion. Citing the pandemic, regulators have just informed the two parties that the deal's review would be put on indefinite hold. When they ultimately shoot it down (and they will), Eldorado will be forced to pay an $837 million breakup fee—or roughly what their company is now worth. This story stinks from start to finish. ERI shareholders should be disgusted, and CZR shareholders should run Icahn out of town on a rail and clear the board of anyone who supported this nefarious financial engineering. Disgusting. We've just talked ourselves out of having ambivelence for Icahn; he is, in our humble opinion, a (add your preferred expletive here).
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SIX
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Six Flags plummets nearly 18% over concerns about the completion of its planned China theme parks. (12 Jan 2020) Shares of Six Flags Entertainment Corp (SIX $41-$36-$64) plunged below their 52-week lows following the company's ominous warnings about its planned theme parks in China—problems so dire that they may lead to the cancellation of the build altogether. It seems as though Six Flags' Chinese development partner, Riverside Investment Group, has defaulted on its required payments to the company, and unless additional funding can be secured all construction will halt. Getting all the bad news out at once, the Texas-based amusement park operator also warned of a fourth quarter revenue drop, perhaps $8 million to $10 million less than it made in the same quarter a year earlier. For investors buying into SIX for its dividend yield—now 9.14% after the most recent share price drop—be forewarned, it is doubtful that the company can keep that rate intact. Between 2010 and 2018, shares of SIX rose nearly 650%; since 2018, they have plunged from $73 per share to $36 per share. Relying solely on its 25 theme parks for revenue, we don't see a catalyst for future growth. Even though they may appear cheap, we wouldn't touch the shares—especially since China was supposed to be their next growth engine.
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ORCL
CZR |
After decades in San Francisco, Oracle is moving its massive annual convention to Vegas for two very specific reasons. (10 Dec 2019) Back in 1996, $182 billion enterprise software giant Oracle (ORCL $42-$56-$61) began hosting an annual conference for business leaders and decision makers to show off the firm's latest technologies. For nearly that long, Oracle has held the convention, known as OpenWorld, in San Francisco. Now, that is about to change. The company confirmed that it has inked a deal with Caesars Forum, a massive new 550,000 square-foot convention center in Las Vegas, to host the event for at least the next three years. Oracle said that two glaring complaints rose to the top of attendee feedback: the city's hotel rates were too high, and the street conditions were poor. Citing a 2018 NPR report, San Francisco's city streets are "strewn with trash, needles, and human feces." The San Francisco Travel Association, a private nonprofit which promotes tourism in the Bay area, said the move will cost the city approximately $64 million per year in lost revenue. The event attracts more than 60,000 Oracle customers and partners each year. Without commenting on San Francisco, it is fair to say that Las Vegas has done a tremendous job in attracting new corporate customers to the city over the past decade.
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EXPE
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Chairman Barry Diller just forced out the CEO and CFO of Expedia. (04 Dec 2019) We have followed Barry Diller's career since he helped launch the Fox network with Rupert Murdoch back in 1986. There are two facets of his personality we are certain about: he is talented, and he is an egotistical blowhard who must be in charge of every situation with which he is involved. In other words, a real joy to work for. Expedia (EXPE $94-$106-$144) CEO Mark Okerstrom and CFO Alan Pickerill can probably attest to the latter observation, as Diller, who has been the chairman of Expedia's board since IAC/InterActiveCorp (IAC) took a controlling interest in the online travel agency back in 2002, just fired the two executives. Expedia had recently undertaken a strategic goal of increasing efficiency via new technologies, but the plan was costly, leading to a 22% loss in net income YoY for the third quarter. The Diller-controlled board issued a statement that it disagreed with the executive team's outlook, thus ordering the change. Diller will take over until a new CEO is found; a job we cannot imagine anyone of sound mind willing to take. Investors did push shares of EXPE up about 6% on the news, but they are still down 6% YTD. Okerstrom had followed in the footsteps of Dara Khosrowshahi who left the company in 2017 to take over the helm of Uber (UBER) from Travis Kalanick. Despite being in a hyper-competitive industry with few barriers to entry, Expedia has the possibility to make some exciting moves. We would steer clear until there is some clarity with respect to the C-suite, however.
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CZR
ERI |
Eldorado Resorts will merge with Caesars, but investing in the new entity is a roll of the dice. (24 Jun 2019) Let's consider the individual entities: Caesars Entertainment (CZR $6-$10-$12), which emerged from bankruptcy just two years ago, has a market cap of $7 billion and long-term debt of $9 billion; Eldorado Resorts (ERI $32-$51-$55), which owns gaming facilities in five states, has a market cap of $4 billion and long-term debt of $3 billion. Exactly what magic will manifest out of thin air with the combination of these two companies? Nonetheless, at the "urging" of Caesars board member Carl Icahn, the two companies have agreed to merge in a deal valued at $8.6 billion. Eldorado offered $12.75 per share to a company whose stock price has floundered around $10 for the past four years (and carries a P/E ratio of 90). Shockingly (sarcasm), Icahn just fattened his wallet at the expense of Eldorado shareholders. When the deal is done, ERI will fold into the Caesars name, and that stock (CZR) will continue to trade. This merger will create an entity large enough to compete with the likes of MGM Resorts (MGM), Wynn Resorts (WYNN), and Las Vegas Sands (LVS), but we wouldn't touch it. The merger was not about creating synergies to grow the company; it was a feat of financial engineering performed by one of the masters of that trade: Carl Icahn.
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CCL
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A weaker outlook is just the latest problem for Carnival Cruise Lines. (20 Jun 2019) Admittedly, we have never been a fan of Carnival Cruise Lines (Carnival Corp, CCL $46-$48-$68) from an investment standpoint. We believe that the higher-end lines, such as Royal Caribbean (RCL) or Norwegian Cruise Line (NCLH), are not only better-managed, but also better able to navigate turbulent economic waters. And, in fact, 2019 has proven our thesis to be strong: while we haven't exactly faced an economic downturn this year, Carnival's stock is negative YTD, while both Norwegian and Royal Caribbean are up around 27%. The latest bit of bad news for the $35 billion budget (our term) cruise line came in the form of lowered guidance for the remainder of the year. Management blamed, among other things, the US government's ban on docking in Cuba. That seems like a pretty flimsy excuse. Following the report and the earnings call, CCL fell nearly 10% and received a downgrade from Nomura, with the analyst lowering his price target from $60 to $52 per share. While we don't currently own a cruise line in any of the Penn portfolios, if we had to pick one to buy right now it would be Norwegian, with its 12 P/E ratio and strong management team.
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MAR
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In bid to battle Airbnb, Marriott is expanding its home-rental business. (29 Apr 2019) The company began with a small pilot program in Europe—leasing 340 properties in major cities. But the test has proven so successful for Marriott (MAR $101-$136-$142), the world's largest hotelier, that the Bethesda-based company will begin rolling out its new home-rental business in North America this year. Soon, guests will be able to make reservations for any of 2,000 properties in approximately 100 cities directly through the Marriott website. The stays will range in price from $200 to over $10,000 per night, depending on the property, and Marriott will allow Bonvoy members to redeem and earn loyalty points for their stays, just as they would at any of the company's 1.3 million hotel rooms. As for Airbnb, which is expected to go public this year, the company has been attempting to encroach further into the hotel business. The most recent move is a deal with a New York developer to create a 200-room hotel in Manhattan. Our favorite hotel from an investment standpoint continues to be Hilton (HLT), but the company has not made any indication that it wants to follow Marriott's path into the home-rental business. We believe it is inevitable, however, that the lines between hotel rooms and other property rentals will become blurred as new competition enters the space.
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MAR
2019.03.18 |
Investors like Marriott's aggressive growth plan. Hotel chain Marriott (MAR $101-$125-$142) saw its shares jump after CEO Arne Sorenson announced an aggressive new growth strategy: the $42 billion firm will open 1,700 hotels around the world, return over $10 billion to shareholders via increased dividends and buybacks, and generate a profit of $8.50 per share—all within the next 36 months. Marriott currently operates 1.3 million rooms across 30 different brands, including Marriott, Sheraton, Ritz-Carlton, and St. Regis. We've been down on Marriott's corporate culture ever since the firm's cowardly firing of 49-year-old Roy Jones after pressure from Mainland China. At that time, MAR shares were trading at $136. We continue to favor Hilton (HLT).
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MTN
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Why has Vail Resorts lost a third of its value in under two months? Going into December of last year, $7.5 billion resorts and casinos conglomerate Vail Resorts Inc (MTN $180-$187-$303) had exemplary performance—up 31% on the year, in fact. Then, like an experienced skier flying down a black slope, it plummeted. By the end of 2018, the company's shares were actually down 1%, and the slide has carried forward into January. So, what happened to the owner of such pristine ski areas as Vail, Breckenridge, Keystone, Beaver Creek, and Park City? At first glance, the season-to-date numbers look pretty good: lift ticket revenue up 12%, ski school revenue up 10%, dining revenue up 15%, and number of skiers up 17%. It all boils down to the rate of growth investors built into the company's price, however. The 26 P/E ratio certainly doesn't seem out of line for a company in the resorts and casinos business, but management's revised guidance for earnings "slightly below the low end" of expectations caught investors off guard. Other than that, the excuses for the large, two-month drop seem pretty flimsy. Despite being a "seasonal" player, Vail has built an annuitized revenue stream with its Epic Pass membership program, which allows for unlimited, unrestricted skiing at the company's resorts (and a fat "off-season" income stream for Vail). Another concern of investors has been the emergence of Alterra Mountain Company and its Ikon Pass. We believe that threat is highly exaggerated, and find MTN undervalued as it sits near its 52-week low. We don't think a $300 share price would be out of line for this well-run company.
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MAR
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Another reason to dislike Marriott: up to 500M guests got their personal data hacked. (30 Nov 2018) Ever since the Blackstone Group (BX) took Hilton (HLT) public back in 2013, it has been our go-to hotel investment. Not only do we like the chain, we despise their biggest publicly-traded nemesis, Marriott (MAR $107-$115-$149). You may recall that we raked the company over the coals back in March due to their disgraceful treatment of employee Roy Jones; now, we have another reason to stay away from the company as an investment. Marriott reported that up to 500 million guests over the past four years had their personal data compromised. Data included passport numbers, home address and phone numbers, and payment card information. The breach stems from a hack at Starwood Hotels, which Marriott bought in 2016, and apparently began a full four years ago—which doesn't say much for the company's cybersecurity program. With 500 million potential victims, this is now the second-largest hack in history (behind Yahoo's damaging data breach). We see the global economy slowing down as we move into 2019, and don't expect much growth from this industry in the near future. That being said, Hilton and Royal Caribbean (RCL) are our two top picks in the industry.
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Gambling
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US Supreme Court rules betting on sports is legal, and not just in Nevada
(14 May 2018) According to the American Sports Betting Coalition, $58 billion in illegal bets were placed on NFL and college football games alone last year, while just $2 billion was bet legally. That is about to change, and someone is going to rake in the dough. When New Jersey threw out the state law prohibiting sports gambling at its casinos, they were—as expected—taken to court. That case worked itself through the court system to the very top of the chain. The 6-3 Supreme Court decision effectively ends Nevada's reign on legalized sports gambling. Who will be the big winners thanks to the decision? Let's look at what happened to some select stocks when the announcement came down: Churchill Downs (CHDN) rose 4%; Caesar's Entertainment (CZR) rose 6%; and William Hill PLC (WIMHF), a UK-based sports betting and gaming services company, rose 9%. Want to take a stab as to who wants a piece of the pie now? You guessed it—the NBA just became the first group to lobby for a new federal law mandating a percentage of all bets go to the respective sports league. Can little Roger Goodell be far behind? |
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MAR
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Marriott's firing of employee Roy Jones is a disgusting and cowardly act
(06 Mar 2018) I have always been a great defender of corporate America, which is under constant assault by those who truly dislike a free market economy. That's why it is so sad to see weak and cowardly acts being committed by "leaders" at US corporations. Take Marriott's (MAR $86-$136-$149) firing of 49-year-old Roy Jones, a worker at the company's customer engagement center in Omaha. The episode which led to Jones's firing began with a screw-up by Marriott. The company (through a third-party provider) emailed a survey to rewards-program members which asked them to identify their home country. Answers included Tibet, Taiwan, and Hong Kong—areas either directly controlled by China or claimed (Taiwan) by China. As a result of the email, a Tibetan independence group thanked Marriott via Twitter for showing Tibet as a country. Jones, who said he would review several hundred tweets per shift, "liked" this particular tweet—not knowing that Tibet was an autonomous region of China. Despite the fact that these tweets could not be seen by ordinary Chinese citizens due to the country's "iron curtain" on social media, the Shanghai Municipal Tourism Administration saw this particular one and demanded Marriott apologize and "deal with" the responsible party. The lapdogs at Marriott complied by apologizing and firing Jones. What a disgraceful and decidedly un-American act. As a veteran who fought to preserve the freedom and ideals of this country, I will remember this story every time I see a Marriott advertisement in the future. |
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HLT
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(31 May 2017) Hilton unveils in-room fitness option. OK, let's admit it: how many of us throw our running shoes and workout gear into our suitcase before a trip—taking up prime space—just to have it return home in mint condition. After all, who wants to get up early just to wait for an elevator to take us to a tiny room packed with five other knuckleheads? Well, our favorite hotel chain, Hilton Worldwide (HLT $52-$66-$66), is doing something about it. At select hotels (more will follow), certain rooms will be outfitted with their own little workout area, complete with a stationary bike, strength training equipment, and a touchscreen "fitness kiosk" loaded with hundreds of targeted fitness videos (stretching, cardio, yoga, strength, etc.). There will be a premium to book these rooms, of course, but we believe this is an excellent concept which will force other chains to follow. In this era of corporate mediocrity, it is refreshing to see some creative thinking by an industry leader.
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