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Bull of the Day: Playa Hotels (PLYA)

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Playa Hotels & Resorts N.V. (PLYA - Free Report) finally has some good news to celebrate as travelers rush to Mexico and the Caribbean in 2022. This Zacks Rank #1 (Strong Buy) is expected to see positive earnings in the year for the first time since the pandemic hit.

Playa Hotels & Resorts owns and/or manages 22 all-inclusive resorts in popular vacation destinations in Mexico, Jamaica and the Dominican Republic.

A Big Beat in Q1

On May 5, Playa Hotels reported its first quarter results and easily beat the Zacks Consensus Estimate by $0.09. Earnings were $0.19 compared to the Zacks Consensus of $0.10.

It was the first quarter earnings were positive in the last 4 quarters.

In spite of the Omicron outbreak in January, Playa Hotels first quarter occupancy rate reached a post-pandemic high and their ADR reached an all-time high with momentum building through the quarter.

Occupancy was 72.4% versus 31.6% a year ago. Net Package ADR rose 34.3% to $388.07 from $288.88 last year.

Mexico used to be the sure thing during the pandemic but the Dominican Republic occupancy surpassed the Mexican resorts during the quarter as the recovery continues to broaden.

Playa Hotels is also optimistic about Jamaica, which recently dropped its COVID-19 testing requirement to enter the country. It believes this will bode well for Jamaica in the second half of the year.

2022's Zacks Consensus Estimate Rises

With the economic reopening, everyone wants to travel. Sure, people were saying in 2021 that everyone wanted to travel. But the demand has gone through the roof in 2022 with airline CEOs saying they've had record bookings.

Zacks only has one estimate on this small cap company but that analyst has raised it over the last week.

The 2022 Zacks Consensus Estimate has jumped to $0.22 from $0.12 before the earnings report. That's earnings growth of 145.8% versus last year when it lost $0.48 per share.

The analyst is also bullish for 2023, with another 70.5% earnings growth expected as the Zacks Consensus has jumped to $0.38.

Is the Travel Boom Already Priced In?

Playa Hotels shares rallied big in 2020 into 2021. Over the last year, they're up only 9.7%. And in 2022, while they have avoided the stock market sell-off, they're up just 3.1%.

Zacks Investment Research
Image Source: Zacks Investment Research

They're also not "cheap" on a P/E basis, which is now 38.8. But given the negative earnings of last year, it was never going to be "cheap" on a P/E basis.

But travel should be one of the big winners as the travel reopening continues and consumers are willing to pay elevated prices to get away. Additionally Playa specializes in the all-inclusive hotels, which are now so popular that big hotel brands are adding new locations to their portfolios.

Playa is in a good position to cash in on the all-inclusive trend and shares have been treading water.

For those who love all-inclusive resorts and the hotel companies, Playa Hotel & Resorts is one to keep on your short list.


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