As the 4th of July approaches, the demand for transportation services surges, driven by the nation’s eagerness to travel and celebrate. The American Automobile Association (AAA) expects 70.9 million individuals to travel 50 miles or more from home over the Independence Day holiday period, surpassing levels witnessed before the pandemic.
For the first time, AAA has analyzed the entire week of July 4th, including the Saturday before and the Sunday after the holiday. This year’s projected number of travelers represents a 5% growth compared to last year and an 8% increase over 2019.
“With summer vacations in full swing and the flexibility of remote work, more Americans are taking extended trips around Independence Day,” stated Paula Twidale, Senior Vice President of AAA Travel. “We anticipate this July 4th week will be the busiest ever with an additional 5.7 million people traveling compared to 2019.”
The travel group projects a record 60.6 million Americans will travel by car the July 4th week, a rise of 2.8 million travelers compared to 2023. This year’s figure also exceeds the 55.3 million people who traveled by car during Independence Day week in 2019.
The number of air travelers is also anticipated to reach a new record. AAA projects that 5.74 million people will fly to their July 4th destinations, marking an increase of approximately 7% year-over-year and a 12% rise over 2019. According to AAA booking data, domestic airfare is 2% cheaper this Independence Day week compared to last year, with the average price for a domestic roundtrip ticket at $800.
The increase in mobility presents a unique investment opportunity in the travel sector, particularly for companies such as Uber Technologies, Inc. (UBER), Southwest Airlines Co. (LUV), and Delta Air Lines, Inc. (DAL). These companies are strategically positioned to capitalize on the holiday rush through operational efficiencies, route expansions, and customer service innovations.
Here’s an in-depth look at why these stocks are attractive investments during peak travel seasons.
Uber Technologies, Inc. (UBER)
Valued at a market cap of $151.87 billion, Uber Technologies, Inc. (UBER) is a leading global ride-hailing company. It connects consumers with a wide range of transportation modalities, including ridesharing, carsharing, public transit, taxis, rentals, micromobility, and other modalities; it also provides riders with several vehicle types.
UBER’s platform leverages advanced algorithms and data analytics to match drivers with passengers efficiently. During peak travel times like the 4th of July, Uber’s dynamic pricing model ensures supply meets demand, optimizing driver availability and minimizing passenger wait times. This operational efficiency is crucial in managing the high volume of holiday travelers.
Features like upfront pricing, real-time tracking, and a robust safety protocol contribute to a seamless travel experience for Uber users.
Moreover, Uber continues to expand its service offerings and geographic reach. It introduced a shuttle service in the U.S. at its GO-GET annual event. The ridesharing company announced that Uber Shuttle users can now reserve up to five seats in advance on buses operating in high-traffic areas such as airports, concerts, and sports events. Uber will collaborate with local fleet operators for this service, utilizing vehicles with capacities ranging from 14 to 55 seats.
Notably, the company has increased its presence in key tourist destinations and expanded its ride options to include shared rides, luxury cars, and eco-friendly transportation, catering to a diverse customer base and enhancing its appeal during the holiday season.
For the first quarter that ended March 31, 2024, UBER’s gross bookings rose 20% year-over-year to $37.70 billion, with Mobility Gross Bookings of $18.70 billion (up 25% year-over-year). Its revenue increased 15% from the year-ago value to $10.10 billion. Its income from operations was $172 million, compared to a loss from operations of $262 million in the same quarter of 2023.
Furthermore, the company’s adjusted EBITDA grew 81.6% from the prior year’s period to $1.38 billion. Its free cash flow came in at $1.36 billion, an increase of 148% year-over-year.
For the second quarter of 2024, Uber expects gross bookings of $38.75 billion to $40.25 billion, representing 18% to 23% year-over-year growth on a constant currency basis. The company’s adjusted EBITDA is expected to be $1.45-$1.53 billion, representing 58%-67% year-over-year.
Analysts expect UBER’s revenue and EPS for the second quarter (ended June 2024) to increase 14.3% and 70% year-over-year to $10.55 billion and $0.31, respectively. For the fiscal year 2024, the company’s revenue and EPS are expected to grow 15.8% and 4.3% year-over-year to $43.18 billion and $0.91, respectively.
UBER’s stock is up around 14% over the past month and has gained more than 64% over the past year. Further gains could come with the July 4th rally.
Delta Air Lines, Inc. (DAL)
Delta Air Lines, Inc. (DAL) is a leading global airline headquartered in Atlanta, Delta, with a market cap of $30.61 billion. The company served over 190 million customers in 2023 – safely, reliably, and with industry-leading customer service innovation – and was recognized as North America’s most on-time airline by Cirium.
Delta Air Lines operates significant hubs and markets in Amsterdam, Atlanta, Boston, Lima, London-Heathrow, Los Angeles, New York-JFK and LaGuardia, Paris-Charles de Gaulle, Salt Lake City, Santiago (Chile), São Paulo, Seoul-Incheon, and Tokyo. The airline maintains strategic partnerships with Aeromexico, Air France-KLM, China Eastern, Korean Air, LATAM, Virgin Atlantic, and WestJet.
DAL’s extensive network and strategic alliances allow it to offer numerous direct flights, reducing layover times and enhancing passenger convenience. Thus, the company is well-positioned to capture a larger share of the holiday travel market and meet the increased demand effectively.
DAL’s operating revenue increased 8% year-over-year to $13.75 billion for the first quarter that ended March 31, 2024. Its adjusted operating income grew 17.2% from the previous year’s period to $640 million. Its adjusted net income and earnings per share were $288 million and $0.45, up 43.4% and 44.4% year-over-year, respectively.
As of March 31, 2023, the company’s cash and cash equivalents amounted to $3.88 billion, compared to $2.74 billion as of December 31, 2023. Its current assets were $11.58 billion versus $10.27 billion as of December 31, 2023.
After an outstanding first-quarter performance, Delta is expected to continue solid business momentum. For the second quarter of 2024, the company expects total revenue growth of 5%-7% year-over-year. Its operating margin is expected to be 14% to 15%, and earnings of $2.20 to $2.50 per share.
For the fiscal year 2024, DAL projects earnings of $6 to $7 per share. The company’s free cash flow is expected to be $3-$4 and adjusted debt to EBITDAR of 2x-3x.
Analysts expect Delta’s revenue and EPS for the fiscal year (ending December 2024) to increase 3% and 5.9% year-over-year to $59.77 billion and $6.62, respectively. Also, the company has topped the consensus revenue and EPS estimates in all four trailing quarters, which is impressive.
Shares of DAL have surged more than 16% over the past six months and nearly 17% year-to-date.
Southwest Airlines Co. (LUV)
With a market cap of $17.12 billion, Southwest Airlines Co. (LUV) is a prominent passenger airline company that offers scheduled air transportation services in the U.S. and near-international markets.
As of December 31, 2023, the company had a total fleet of 817 Boeing 737 aircraft and served around 121 destinations in 42 states, the District of Columbia, and the Commonwealth of Puerto Rico, as well as near-international countries, including Mexico, Aruba, Costa Rica, Jamaica, the Bahamas, Belize, Cuba, the Dominican Republic, the Cayman Islands, and Turks and Caicos.
Southwest Airlines is well-known for its low-cost, high-efficiency operational model. As a part of its birthday celebration, LUV announced a sale on flights starting as low as $53 one-way. Also, in May, the company introduced Cash + Points, a new flexible payment option for Rapid Rewards® Members. Southwest Rapid Rewards® Members can now use a combination of cash and points on hotel bookings.
The airline’s flexible booking policies and extensive network of direct flights make it a preferred choice for many travelers. Southwest Airlines’ route expansion and new destinations are aligned with its strategy to capture the leisure travel market, which peaks during holidays like the 4th of July.
Southwest has consistently been recognized for its customer service, emphasizing a hassle-free travel experience. The airline is ranked first in customer satisfaction among economy-class passengers by J.D. Power for the third consecutive year.
During the first quarter that ended March 31, 2024, LUV’s passenger operating revenues increased 11.9% year-over-year to $5.71 billion. Its total operating revenues grew 10.9% from the prior year’s quarter to $6.33 billion. As of March 31, 2024, the company’s cash and cash equivalents stood at $8.37 billion, and current assets were $13.28 billion.
Street expects LUV’s revenue for the second quarter (ended June 2024) to increase 5.1% year-over-year to $7.39 billion. Similarly, the consensus revenue estimate of $27.69 billion for the fiscal year (ending December 2024) indicates an improvement of 6.1% year-over-year.
LUV’s stock has surged more than 6% over the past month.
Bottom Line
AAA projects a record of around 71 million people to make trips for the Independence Day travel period this year. UBER, DAL, and LUV are well-positioned to benefit from the increased demand for transportation services during the 4th of July. Their operational efficiencies, route expansions, and customer service innovations provide a strong foundation for capturing a larger share of the leisure travel market.
Given robust financial performances and bright growth outlooks, these stocks present attractive investment opportunities during peak travel seasons.
