Work and Play: Investing in the Rise of Bleisure Travel

This new era of travel presents unique opportunities for observant investors. In fact, the global Bleisure travel market is projected to reach an impressive $3.5 trillion by 2033.

Let's look at three stocks set to capitalize on the immense potential of Bleisure travel.

1. JetBlue: Flying High on Bleisure Demand

The airline industry is strategically adapting to the rise of Bleisure, and JetBlue Airways (NASDAQ: JBLU) provides a compelling example.

JetBlue has undertaken significant initiatives to position itself as a major player in the premium leisure segment, which includes Bleisure travelers. One key element of JetBlue's strategy is network expansion. The airline is strategically adding routes to popular Bleisure destinations, domestically and internationally. 

These expansions cater to the growing demand for travel to destinations that offer business and leisure opportunities. To enhance the travel experience for Bleisure passengers, JetBlue is also investing in product improvements. Starting in 2025, its "Even More Space" offering will be upgraded with new amenities and perks designed to provide extra comfort and convenience. This focus on premium seating aligns with the preferences of Bleisure travelers, who often prioritize comfort during their extended trips.

JetBlue's earnings report for the third quarter of fiscal year 2024 reflects the challenges and opportunities in the current market. While the airline reported a net loss of $60 million, it also saw a revenue increase of 0.5% year-over-year, reaching $2.4 billion. Notably, customer satisfaction increased by double digits, and the company achieved $275 million in incremental top-line benefits from its revenue initiatives. These results suggest that JetBlue's strategic focus on the Bleisure segment is starting to yield positive results. 

As of December 30, 2024, JetBlue's stock is trading at $8.01, reflecting a 44.3% increase year-to-date and hitting a new 12-month high. Despite a consensus Reduce rating from analysts, recent upgrades and increased price targets indicate a growing optimism about the airline's prospects. The opening of a new crew base in San Juan, Puerto Rico, further strengthens JetBlue's position in the Caribbean, a key Bleisure market. This move is expected to enhance operational efficiency and provide greater flexibility in responding to market demands.

2. Hilton: Hosting the Bleisure Revolution

The hotel industry is also making changes to accommodate the needs of Bleisure travelers. Hilton Worldwide Holdings (NYSE: HLT) is a prime example of a hotelier adapting to this trend. With its diverse portfolio of brands, Hilton caters to a wide range of Bleisure traveler preferences. The addition of Small Luxury Hotels of the World to its portfolio further expands Hilton's reach into unique and desirable destinations.

Hilton's earnings for Q3 FY2024 demonstrate the company's strong performance. Revenue increased by 7.3% year-over-year to $2.867 billion, with net income reaching $344 million. The company achieved a system-wide RevPAR growth of 1.4% and an impressive 7.8% net unit growth. Hilton's development pipeline is healthy, with 492,400 rooms in the works, including the opening of its 8,000th hotel globally. This expansion, including new locations like the Hilton Kyoto, underscores the company's commitment to growth in key international markets.

Hilton's increased stock repurchase authorization, now at approximately $4.8 billion, signals strong confidence in its future performance.

Although the consensus among Hilton's analyst community is currently a Hold rating, there's a shift in sentiment as some begin to reevaluate the stock's potential. This is evident in the upward revision of the target price by three analysts in December, with one setting it as high as $277.00. These adjustments signal continued confidence in Hilton's ability to implement its strategic initiatives successfully. 

3. Booking Holdings: The Digital Gateway to Bleisure

Online booking platforms are crucial in facilitating the Bleisure travel experience, and Booking Holdings (NASDAQ: BKNG) is a dominant force in this space.

Through its brands, including Booking.com, Priceline, Agoda, KAYAK, and OpenTable, the company offers a comprehensive suite of travel services, from flights and accommodations to car rentals and restaurant reservations. Booking Holdings' platform is particularly well-suited for Bleisure travelers who need to manage the business and leisure aspects of their trips seamlessly.

Booking Holdings' earnings for Q3 FY2024 highlight the company's continued success. Revenue grew by 9% year-over-year to $8.0 billion, with net income reaching $2.5 billion. Room night bookings increased by 8%, and gross travel bookings were up 9% at $43.4 billion.

These figures demonstrate the strong demand for online travel services, driven in part by the Bleisure trend.

The company's mission "to make it easier for everyone to experience the world" aligns perfectly with the desires of Bleisure travelers seeking seamless and efficient booking experiences. 

Riding the Bleisure Wave

The Bleisure travel trend represents a fundamental shift in how people approach travel, blurring the lines between work and leisure. This trend is reshaping the travel industry, creating new opportunities for companies that adapt to travelers' evolving needs. JetBlue, Hilton, and Booking Holdings are examples of companies strategically positioning themselves to benefit from the growing Bleisure trend. 

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Top Dividend Stocks to Buy Now as Bond Yields Could Lower

The concept of market relativity is more alive than ever in today’s economy, as gone are the days of individualistic price action in different asset classes and even stocks. With the advances in data delivery and technology, traders across the financial sector have found ways to connect the dots in pretty much all markets, and that is the one thing that these big hedge funds and investment bank traders get right.

By relativity, investors can focus on the shifting preferences between different markets, especially when taking into account what’s considered to be the next best thing. For example, the United States 10-Year Treasury Bond Note Yield is typically considered the “risk-free” rate, the benchmark from which all other yields and potential risks are viewed.

That is why, as the possibility of a new bond rally looms bigger, investors should prepare themselves for the rotations that would likely follow. Particularly the rotations back into dividend stocks as bond yields become less attractive next to these names. Names like the Schwab US Dividend Equity ETF (NYSEARCA: SCHD), Exxon Mobil Co. (NYSE: XOM) as one of the energy sector’s leaders, and even Whirlpool Co. (NYSE: WHR).

A Diversified Way to Play Dividend Stocks

Some investors find that owning individual stocks can become a headache due to their capital requirements and risk tolerances. This strategy involves keeping up with individual company developments, earnings, price action, and everything else that entails managing a concentrated portfolio.

That is why the Schwab US Dividend Equity ETF could become an attractive proposition. It is diversified well enough across different sectors and industries, giving investors a relatively smoother ride for their allocations. Investors can see that this ETF traded a bit lower as bond yields were rising recently.

This price action, bringing the ETF nearly 10% off its 52-week high, is because its dividend yield couldn’t justify the added equity risk when bonds started offering 4.6% again. However, its $2.56 payout per share brought the yield to a much higher 9.3% today, starting to draw some new buyer attention.

As of November 2024, those at MML Investor Services decided to boost their holdings in this dividend ETF by as much as 5.9%, bringing their net position to a high of $145.6 million today. These weren’t the only buyers for the month, though; High Tower Advisors boosted theirs by 0.4% to get them to $138.5 million as well.

Risk-to-Reward Setups Favor Oil Stocks

There’s a reason Warren Buffett decided to buy up to 29% of Occidental Petroleum Co. (NYSE OXY): He realizes that the energy sector's upside potential is unmatched. Even hedge funds have started buying up oil futures to load on their inventory in case prices rally from their current cyclical lows.

However, not all oil stocks are made the same. Exxon Mobil shares have an inherent advantage: They carry a lower beta, meaning they are less volatile and, therefore, more attractive during this rotation out of lower bond yields into the next best thing.

This lower beta exposure, coupled with Exxon’s $3.96 a share payout, would make the stock’s 3.7% dividend yield today an attractive proposition when the rotation out of bonds gets to the market. This is especially true as investors realize that it isn’t only the low volatility and income potential but also the upside.

Wall Street analysts, particularly those from the UBS Group, were willing to publish their optimistic outlooks on Exxon Mobil stock. As of December 2024, they see Exxon Mobil as a buy and have placed a valuation of $147 a share on it, calling for up to 38% from where it trades today.

A Discount in Whirlpool Stock Won’t Last

As the mortgage market index fell to a 1996 low, lateral names in the real estate sector followed, suggesting less demand and activity in housing. This is why investors can see Whirlpool stock trade at discounts to the rest of the consumer discretionary sector today.

With a price-to-book (P/B) ratio of only 2.5x, Whirlpool stock is significantly below the sector’s average 5.6x multiple today. This discount, along with its 6.1% dividend payout, makes Whirlpool stock a potential buy for investors looking to successfully rotate out of bonds and into more attractive income-generating assets with some additional upside.

This theme is reflected in the recent institutional buying activity for Whirlpool stock, led by those from Charles Schwab at a 14.7% boost as of November 2024, getting them to a net $216.1 million position or 3.6% ownership in the company. If the stock is cheap enough for the bank that runs this dividend ETF, then it sure is cheap enough for investors today.

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SAP: AI Tailwinds Accelerating Enterprise Cloud Business

Global enterprise software giant SAP SE (NYSE: SAP) has been scratching at all-time highs as its business gets lifted by artificial intelligence (AI) tailwinds. SAP is an acronym for Systems, Applications, and Products in Data Processing. The company provides cloud-based business software through its flagship enterprise resource planning (ERP) product.

This package integrates a comprehensive and synergistic range of business software, including accounting, human capital management (HCM), customer relationship management (CRM), project management, and procurement functions onto a single unified platform. The company custom tailors its software to meet the needs of each specific industry with AI and machine learning capabilities into their core applications.

SAP is a leader in the computer and technology sector, competing against multinational enterprise software giants like International Business Machines Co. (NYSE: IBM), Microsoft Co. (NASDAQ: MSFT), Salesforce Inc. (NYSE: CRM) and Oracle Co. (NYSE: ORCL). Some of their major corporate clients include The Clorox Company (NYSE: CLX), eBay Inc. (NASDAQ: EBAY), NVIDIA CO (NASDAQ: NVDA) and Mondelez International Inc. (NASDAQ: MDLZ).

30% of Deals in Q3 Involved AI Use Cases

The updraft was certainly evident in its third quarter 2024 adjusted EPS growth of 6% YoY to $1.33, which beat analyst estimates by 2 cents on 9.4% YoY revenues growth to $9.17 billion, which also beat consensus estimates of $9.15 billion. The current cloud backlog rose 25% YoY to $15.38 billion. Cloud ERP Suite revenue rose 34% YoY to $3.67 billion. Cloud revenue rose 25% YoY to $4.35 billion.

The company has had ongoing cloud transformation transitioning clients for the past four years, and it's hitting its stride driven by AI. Buoyed by Gen AI Hub, nearly 30% of its cloud order entries in the quarter were deals that had AI use cases. SAP hit its goal of 100 AI use cases across its suite. AI consumption by SAP customers more than quadrupled in the quarter. SAP completed its $1.5 billion acquisition of digital adoption platform WalkMe.

Sustained Momentum Moving Ahead

SAP expects the momentum to remain steady moving forward. They bumped up their cloud and software revenue forecast by $433 million at the midpoint to $31.93 billion to $32.24 billion. Cloud revenue is expected to be between $18.41 billion to $18.73 billion, maintaining its previous forecast.

While SAP doesn't anticipate margin risks in 2025, it is speculative how AI activity may impact gross margins beyond 2025. However, the company believes AI will be margin accretive. The company has been very consistent in 2024 as the AI trend has been unwavering, which points to a strong Q4 2024.

SAP Forms an Ascending Triangle Pattern

An ascending triangle is comprised of a flat-top upper trendline resistance converging with an ascending (rising) lower trendline support. The breakout occurs when the stock surges through the upper trendline. If the stock collapses under the lower ascending trendline, then the pattern fails as a breakdown forms.

SAP formed the upper flat-top trendline resistance at $242.10 converging with the lower ascending trendline support which commenced around the $219.55 swing low. SAP tested the upper trendline resistance nearly eight times without managing to break out, and the ascending trendline was tested twice. The daily anchored VWAP support is at $236.35. The daily RSI is rising at the 62-band. Fibonacci(Fib) pullback support levels are at $237.30, $231.10, $224.60, and $214.65.

SAP's average consensus price target is $252.35, implying a 0.96% upsideand its highest analyst price target sits at $300.00. It has eight analysts' Buy ratings and one Hold rating. The stock has a miniscule 0.11% short interest.

Actionable Options Strategies: Bullish investors can consider using cash-secured puts at the Fib pullback support levels to buy the dip. If assigned the shares, then writing covered call at upside Fib levels executes a wheel strategy for income on top of its 0.69% dividend yield.

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