Back to top

Image: Bigstock

Airline Stocks Fly Back into Play on New Bookings

Read MoreHide Full Article

An hour before Thursday’s closing bell, the Dow Jones Industrial Average was trading in the red nearly 200 points. By the time the bell sounded, the Dow was +12 points. True, that’s only a 0.05% gain on the index, but it demonstrates how market participants’ positive sentiment about trading conditions are hard to keep down. A surge by Boeing (BA - Free Report) this afternoon did a notable part of the heavy lifting. The Nasdaq finished down 67 points on the day (-0.69%), with the S&P 500 -0.34%.

Airline stocks made a big push higher on the day, with the Big 4 — Southwest (LUV - Free Report) , Delta (DAL - Free Report) , American (AAL - Free Report) and United (UAL - Free Report) — seeing a 27% jump in June booking month over month. American alone posted 60% growth in July bookings year over year. Carriers are adding hundreds of flights during the post-lockdown reopening of the U.S. economy.

The main question for these and other airlines is: Will customers continue to oblige and fill the seats on these new flights? It’s as yet unknown whether pent-up demand will outweigh fears of an outbreak reemergence of COVID-19.

Las Vegas casinos also began reopening today, on strong demand from gaming and entertainment customers. The state of Nevada has been one of the hardest hit with job losses over the past few months, with casinos shuttering over that time period the main reason.

Now, with plenty of hand sanitizer and digital thermometers some added features for patrons — not to mention limiting crowds at the craps tables and elsewhere — the companies are hoping for that “V”-shaped recovery analysts had been anticipating. MGM Resorts (MGM - Free Report) shares are up 25% so far this week, with Wynn Resorts (WYNN - Free Report) +14%.

On the other side of this coin, retailers are now facing lawsuits from their shopping mall landlords; just today, Simon Property Group (SPG - Free Report) is reportedly suing The Gap (GPS - Free Report) for $66 million on defaulted rent payments. Gap is Simon’s biggest non-anchor tenant. Further, Gap has reported misses in its quarterly statement Thursday afternoon on both top and bottom lines: -$2.51 per share on $2.11 billion were both beneath Zacks consensus estimates, with its Banana Republic stores losing 47% year over year.

Malls around the country are facing challenges, as closed stores have led to zero cash flows, resulting in rent delinquencies. This appears to now be evolving to litigation between tenants and their property owners. Even with an eviction moratorium in many areas of the U.S. based of “shelter in place” dictums since March, this developing story between REITs and Retailers could get big and ugly.


Zacks Responds to Pot Stock "Gold Rush"

With almost unimaginable profit potential, legalized marijuana is skyrocketing from $9 billion in 2017 to an expected $32 billion in 2020 to a possible $146 billion by 2025. Not since the Repeal of Prohibition has there been such a release of pent-up demand.

See Zacks’ recommended buys >>

Published in