The travel trade is in trouble.
Airline, hotel and cruise line stocks slid on Friday ahead of Thanksgiving week after the CDC issued a warning on traveling for the holiday amid climbing Covid case counts.
Expedia data released before the CDC's announcement showed 60% of U.S. consumers said they would not be traveling for Thanksgiving. Those who will travel will go an average of 250 miles away from home, down from 450 miles a year ago, the data revealed.
Travel stocks' road to recovery will likely be a bumpy ride, according o Boris Schlossberg, managing director of FX strategy at BK Asset Management.
"The market is discounting an absolutely perfect scenario that hasn't even occurred yet, which is the idea that a vaccine is going to immunize everybody and we're all going to go back to travel," Schlossberg said Friday on CNBC's "Trading Nation."
"Between now and then, all of these companies are going to have a very, very hard time surviving and actually making any profits," he said. "To me, a lot of these names have been overbought at this point, and I think they're actually very vulnerable to a sell-off as they see very, very little engagement from the consumer."
Schlossberg warned that consumer activity risks "retrenching" in the coming weeks amid the nationwide rise in Covid cases.
"At this point, the behavior of the consumer is going to take much longer than the market thinks to come back for these companies to really perform well," he said.
One travel play seems to have been "vaccinated" before the rest of the industry, Piper Sandler's Craig Johnson said in the same interview.
"Look at the JETS ETF," the firm's senior technical research analyst said. "I think most investors are looking beyond this near-term travel season."
"The first chart is I look at the correlation of the JETS ETF to the coronavirus cases," Johnson said. "Back in the June-July time frame when there was a spike in cases, you actually saw that ETF trade lower. Now, you've got the exact opposite happening that there is a vaccine out, and you're seeing that cases are moving up sharply higher and yet you're seeing the ETF … move higher, too."
To Johnson, that meant investors didn't care much about how long a full-fledged comeback in the travel space might take.
"They're … focused on that vaccination, and a move above $21 would open up a new leg higher on the JETS ETF, perhaps up to around the $30 range," he said.
Schlossberg didn't quite agree.
"To me, the runaway trade in JETS is just going to be a fade at this point," he said.
JETS closed about 1.5% lower on Friday at $20.76 a share.
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