Travel + Leisure Stock Up 47% in a Year: Should You Buy, Hold or Fold?

Core Viewpoint - Travel + Leisure Co. (TNL) has experienced a significant stock surge of 46.6% over the past year, outperforming the industry and the S&P 500, which grew by 26.1% and 31% respectively [1]. Stock Performance - As of Wednesday, TNL's stock closed at $53.99, just 5.1% below its 52-week high and 42.1% above its 52-week low [2]. - The stock is trading above its 50-day moving average, indicating strong upward momentum and price stability, reflecting positive market sentiment and confidence in TNL's financial health [2]. Business Performance and Growth Drivers - TNL is benefiting from robust volume per guest (VPG), which reached the high end of expectations in Q3 2024, nearly 30% higher than in 2019, driven by strong engagement from existing owners [6]. - The average FICO score for originations has increased from 725 to 742 over the past four years, with a decline in the proportion of portfolio holders with scores below 640, enhancing long-term revenue potential [7]. - The average age of TNL's owners has shifted to the mid-50s, indicating increased sales to Gen X, millennials, and younger generations, alongside improved credit quality in the loan portfolio [8]. - TNL's diverse geographic footprint and multi-brand strategy position the company well to capture a larger share of the vacation travel market, particularly in popular destinations [9]. - The integration of Accor Vacation Club has been beneficial, generating over $3 million in adjusted EBITDA so far this year, with growth expected to accelerate next year [10]. - New partnerships with Allegiant and Live Nation are anticipated to bolster tour growth [11]. Financial Metrics - The Zacks Consensus Estimate for TNL's earnings in 2024 and 2025 has seen slight downward revisions of 0.3% and 0.2%, now at $5.75 and $6.40 respectively [12]. - TNL is currently valued at a discount compared to the industry, with a forward 12-month price-to-earnings ratio of 8.5, lower than competitors like Atour Lifestyle Holdings Limited, Marriott Vacations Worldwide Corporation, and Hilton Grand Vacations Inc. [13]. Challenges and Risks - TNL faces challenges with a 3% decline in travel membership revenues in Q3 2024, indicating difficulties in adapting to industry consolidation and changing customer preferences [15]. - Long-term inventory costs may rise with new developments, although the company aims to manage this through strategic planning [15].