The Zacks Leisure and Recreation Services Industry currently sits among the top 31% of over 250 Zacks industries. Adding to its allure, numerous stocks within the sector have secured a spot on the esteemed Zacks Rank #1 (Strong Buy) list.
Atour Lifestyle Holdings
Post the revelation of China’s new economic stimulus and deflationary strategies, the spotlight is on Atour Lifestyle Holdings (ATAT) stock.
As the largest upper midscale hotel chain in China, Atour boasts a network comprising 834 hotels spread across 151 Chinese cities. In the recent surge of Chinese equities, Atour has emerged as one of the frontrunners, with ATAT skyrocketing over 50% in the last month and marking a 66% increase year-to-date.
The surge can be attributed to the upward revisions in earnings estimates for fiscal 2024 and FY25 by 10% and 5% in the last 60 days, respectively. Notably, ATAT is still priced at a rational 22.8X forwards earnings multiple, with an anticipated 32% surge in annual EPS this year to $1.22 compared to $0.92 per share in 2023. Additionally, FY25 EPS is predicted to expand by 14%.
Atour anticipates robust double-digit growth in its top line, with annual sales veering towards $1 billion. Investors are enticed by Atour’s 1.51% annual dividend yield, especially given that ATAT has soared by 120% since its debut on the public market in November 2022.
Cruise Lines: CCL & NCLH Stocks
The recent decision by the Federal Reserve to slash interest rates in the US is poised to boost consumer discretionary spending, benefiting Carnival Corporation (CCL) and Norwegian Cruise Line (NCLH), both adorned with a Strong Buy rating.
With record bookings heading into 2024, both cruise liners anticipate a strong rebound in earnings, supported by consistent top-line growth. Moreover, EPS estimates for Carnival and Norwegian have been on an upward trajectory in the past 30 days. What adds to the intrigue is that CCL and NCLH are trading at substantial discounts compared to the Zacks Leisure and Recreation Services Industry average of 22.5X forward earnings and the S&P 500’s 24.4X.
Bottom Line
The uptick in spending on leisure and recreation services amidst the global easing of inflation may translate to increased consumer discretionary expenditure. This augurs well for these top-ranked Zacks stocks, suggesting ripe opportunities for short-term growth.
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