Goldman Sachs sees the economic reopening trade alive and well, despite the spread of the Covid omicron variant.
Specifically it likes amusement-park company Six Flags Entertainment (SIX) - Get Six Flags Entertainment Corporation Report, Wyndham Hotels and Resorts (WH) - Get Wyndham Hotels & Resorts, Inc. Report, Hilton Grand Vacations, (HGV) - Get Hilton Grand Vacations, Inc. Report, Marriott (MAR) - Get Marriott International, Inc. Class A Report, Hilton (HLT) - Get Hilton Worldwide Holdings Inc Report and Hyatt Hotels (H) - Get Hyatt Hotels Corporation Class A Report.
“Given the correction across our group [gaming, lodging and leisure] over the past month (negative 10% versus plus 2% for the S&P 500), we see potential for a return to the reopening trade,” wrote Goldman analysts led by Stephen Grambling.
“We believe investors will still focus on those names with greater visibility and/or secular growth themes.
“Thus, we upgrade SIX [to buy from neutral,] given purely domestic-leisure exposure that has proven its resilience through the pandemic and has idiosyncratic upside potential under new leadership.
“We continue to highlight WYND/HGV under a similar thesis, but also reiterate buys on MAR/HLT/H, given higher free cash flow visibility and second-derivative improvement in business travel.
“Our high level views include:
“1) Pent-up demand in leisure will continue into 2022, with particularly strong trends for those with higher-end exposure;
2) An ongoing recovery in business travel and return to destination travel; and
3) Faster than typical group travel recovery and better corresponding food and beverage spending.”
As for Six Flags, “we see positive earnings revisions on resilient ticket pricing (up 6% in 2023 versus 2019), in-park spending (up 16% in 2023 versus 2019), and cost control coupled with re-rating driving 34% upside to our 12-month $52 price target,” the Goldman analysts said.
Six Flags recently traded at $39.79, down 1.1%.