Morningstar - Q3 2022 - 45

0.65
4.73
-15
-30
02/2020
EXHIBIT 2
return of the business traveler and forecast that its
operating margin will rebound to prepandemic
levels in 2025.
Undervalued Air Travel
Stock
American
Airlines AAL
09/2020
04/2021
11/2021
05/2022
Services Shortfall The lag in consumer spending on services is especially
pronounced in the restaurant and hotel, recreation, and transportation categories.
Services Consumption (Real), % Cumulative Growth Since Q4 2019
Category
Actual
Morningstar
Rating
P/FV
Economic
Moat
QQQQ 0.67 None
Delta Air Lines DAL QQQQ 0.53 None
Southwest
Airlines LUV
QQQQ 0.63 None
Sources: Morningstar and PitchBook. Data as of 06/30/2022.
Cruise Lines
Early in the pandemic, few industries were as
tarnished as the cruise lines. Cruises initially
canceled departures and shut down travel routes.
In 2022, industry capacity has returned, and
passenger numbers have been quickly rebounding.
For example, during its first-quarter earnings call,
Norwegian Cruise Line NCLH reported that
its booked position will improve throughout the
rest of the year and that the fourth quarter
will be in line with the comparable 2019 period
but at meaningfully higher prices. Booking
trends for 2023 continued to be positive, with both
the number of booked passengers and pricing
significantly higher and at record levels compared
with 2019. Similarly, we think other undervalued
cruise lines, such as Carnival CCL and Royal
Caribbean Cruises RCL, are poised to benefit from
the same trends.
Undervalued Cruise Lines
Stock
Carnival CCL
Norwegian Cruise
Line NCLH
Royal Caribbean
Cruises RCL
as Caesars Entertainment CZR and MGM Resorts
MGM will benefit. With over 60 million members
in its industry loyalty program, leadership in
digital and sports gaming, and additional synergies
to be derived from its merger with Eldorado
in 2020, we think Caesars is the best positioned to
benefit from the recovery in the gaming industry.
Undervalued Gaming
Stock
Caesars
Entertainment CZR
MGM Resorts MGM QQQQ 0.62 None
Sources: Morningstar and PitchBook. Data as of 06/30/2022.
Morningstar
Rating
P/FV
Economic
Moat
QQQQQ 0.36 None
QQQQQ 0.38 None
QQQQQ 0.44 None
Sources: Morningstar and PitchBook. Data as of 06/30/2022.
Gaming
Las Vegas is quickly recovering to prepandemic
levels, and we think casino operators such
Hotels
As vacations were postponed and business
trips canceled in 2020, the amount of revenue per
available room dropped more than 60% on
average across the hotel industry. Revenue and
occupancy began to rebound in 2021, and
in 2022, we expect that many hotels will return
to 90% of their prepandemic levels. Generally, we
expect the hotels we cover to return to
prepandemic levels by 2023.
Hotel stocks held up relatively well earlier this
year but have been caught up with the rest of the
market in the June selloff. While many hotel
stocks are fairly to slightly undervalued, we see
the most upside potential in a hotel REIT stock:
Park Hotels & Resorts PK, the second-largest U.S.
lodging REIT. The company, which focuses
on the upscale hotel segment, is highly leveraged
to group, international, and business travel,
and we forecast it will return to prepandemic
levels in 2024.
Morningstar
Rating
P/FV
Economic
Moat
QQQQQ 0.38 None
Hilton
Worldwide HLT
Hyatt Hotels H
Marriott
International MAR
Park Hotels &
Resorts PK
Wyndham Hotel
Group WH
QQQQ 0.53 None
QQQQ 0.77 Narrow
Sources: Morningstar and PitchBook. Data as of 06/30/2022.
Ride-Hailing
Ride-hailing fell off a cliff early in the pandemic,
as people were unwilling to venture out into
public and certainly did not want to share space in
a car with a stranger. As the pandemic subsides,
both the number of riders and frequency per
morningstar.com/products/magazine
45
Undervalued Hotels
Stock
Restaurant and Hotel
Recreation
Transportation
Healthcare
Other
Total
-12
Source: Morningstar. Data as of 05/31/2022.
-8
-4
4
8
12
Trend
Morningstar
Rating
P/FV
Economic
Moat
QQQQ 0.87 Narrow
QQQQ 0.76 Narrow
QQQQ 0.83 Narrow
https://www.morningstar.com/stocks/xnas/czr/quote https://www.morningstar.com/stocks/xnys/mgm/quote https://www.morningstar.com/stocks/xnys/mgm/quote https://www.morningstar.com/stocks/xnys/pk/quote https://www.morningstar.com/stocks/xnys/nclh/quote https://www.morningstar.com/stocks/xnys/ccl/quote https://www.morningstar.com/stocks/xnys/rcl/quote https://www.morningstar.com/stocks/xnys/rcl/quote http://www.morningstar.com/products/magazine

Morningstar - Q3 2022

Table of Contents for the Digital Edition of Morningstar - Q3 2022

Contents
Morningstar - Q3 2022 - Cover1
Morningstar - Q3 2022 - Cover2
Morningstar - Q3 2022 - 1
Morningstar - Q3 2022 - 2
Morningstar - Q3 2022 - Contents
Morningstar - Q3 2022 - 4
Morningstar - Q3 2022 - 5
Morningstar - Q3 2022 - 6
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Morningstar - Q3 2022 - Cover3
Morningstar - Q3 2022 - Cover4
Morningstar - Q3 2022 - S1
Morningstar - Q3 2022 - S2
Morningstar - Q3 2022 - S3
Morningstar - Q3 2022 - S4
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Morningstar - Q3 2022 - S29
Morningstar - Q3 2022 - S30
Morningstar - Q3 2022 - S31
Morningstar - Q3 2022 - S32
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