Travel is making a comeback—and travel stocks are, too.
Air travel was decimated by the global pandemic taking aerospace and travel stocks with it. On April 14, 2020, only 87,534 people boarded planes in the U.S. That was the lowest number during the pandemic and represents an incredible year over year drop of more than 96%.
But this past week, more than 1.1 million people boarded planes each day on average. That’s still down about 50% year over year, but it’s nearly 13 times more than 87,000 and up almost 20% since the end of February. The travel recovery is picking up steam.
Travel stocks have been making a comeback, too. Airlines stocks, for instance, jumped 8% last week, with American Airlines climbing 14%. All are rising again on Monday.
The improvement for airlines was enough for Morgan Stanley analyst Kristine Liwag to up the aerospace sector to attractive from cautious. That’s like going to Buy from Hold on a stock. She also increased her price target for Buy-rated Boeing stock to $274 from $250.
Liwag isn’t the only analyst seeing opportunity in Boeing. At the April travel-nadir, fewer than 40% of analysts had a Buy rating on Boeing. Now more than half do.
It looks like there’s a bull market in analyst sentiment, too.
—Al Root
*** Barron’s is honoring women across the industry for their leadership, accomplishments, and contributions. The 2021 list includes Sonal Desai, Suzanne Donohoe, Jane Fraser, and more. New profiles will be published weekly—see the full list and read the newest profiles here.
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Europe Quarrels About Vaccines as Pandemic Keeps Spreading
The pandemic gives no signs of receding in France, Germany or Italy as vaccination campaigns still struggle with logistics and supply issues. And several EU members have protested against the EU’s vaccine policies.
- Half of Italy was forced back into strict lockdown Monday after the government of Prime Minister Mario Draghi decided to take over the powers exercised so far by regional councils. And the rest of the country was put under tighter restrictions.
- French Prime Minister Jean Castex acknowledged the seriousness of the coronavirus wave in the Paris region but refrained to put the region under lockdown as are areas in the north of France and on the Mediterranean coast.
- Six EU countries led by Austria and the Czech Republic complained in their letter to the European Commission about alleged “huge disparities” in the allocation of vaccines among member states.
- Angela Merkel’s ruling Christian Democrat party CDU suffered heavy defeats in two major German regions on Sunday, largely fueled by voters’ anger about the government’s handling of the coronavirus pandemic.
What’s Next: The German elections may be just the first sign of the possible political consequences of Europe’s failure to mount proper vaccination campaigns. Even though the pace has picked up of late, ruling parties may have to pay the price for failing to grasp the connection between jabs and jobs.
—Pierre Briançon
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AstraZeneca’s Problems Mount—This Time Over Reports of Blood Clots
The Netherlands, Ireland and northern Italy became the latest places on Sunday to temporarily halt the use of the AstraZeneca vaccine—which was developed with the University of Oxford and has been given to more than 17 million people in Europe—as concerns grow about its safety and effectiveness.
- Reports of blood clots in people who took the AstraZeneca vaccine have caused several countries—including the Netherlands, Ireland, Denmark, Austria, Estonia, Lithuania, Norway, Iceland, Bulgaria, Thailand—to stop or suspend its use. South Africa switched to the Johnson & Johnson vaccine after trials showed the AstraZeneca formula was less effective there.
- AstraZeneca said Sunday that there is “no evidence of an increased risk of pulmonary embolism, deep vein thrombosis (DVT) or thrombocytopenia,” adding that the 37 reported incidents are “much lower than would be expected to occur naturally in a general population of this size and is similar across other licensed Covid-19 vaccines.”
- The World Health Organization has said the vaccine should continue being administered. European Medicines Agency has authorized the shot for use across the European Union, but says its safety committee is “investigating cases of thromboembolic events.”
- AstraZeneca faced its first setback last fall when it revealed a dosing error in a trial conducted in the U.K. Although it has not yet applied for approval in the U.S., AstraZeneca started making its vaccine stateside after the Trump administration placed an order for 300 million doses last year.
What’s Next: Tens of millions of doses of the AstraZeneca vaccine are currently stockpiled in factories in Ohio and Maryland. AstraZeneca has asked to send some of them to Europe, where it has fallen behind on orders, but the Biden administration has declined the request.
—Janet H. Cho
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Biden Still Undecided on Wealth Tax: Yellen
President Joseph Biden hasn’t proposed a wealth tax and has not yet decided whether or not to create one, but it is something the U.S. administration “can look at,” Treasury Secretary Janet Yellen said Sunday.
- Sen. Elizabeth Warren (D., Mass.) two weeks ago revived one the key planks of her Democratic primary platform and proposed legislation creating a 2% annual “multimilliionaire” tax on households’ net worth above $50 million, with a 1% surcharge above $1 billion.
- During his campaign, Biden proposed higher taxes on corporate profits, capital gains and dividends, as well as the richest individuals, but didn’t endorse a wealth tax.
- In her interview Sunday on ABC’s Meet the Press, Yellen acknowledged that “over time,” the administration would have to “be putting forth proposals to get deficits under control.”
- She also noted that due to historically low interest rates, interest payments on government debt “relative to the size of the economy have remained quite low.”
What’s Next: Yellen has never hidden in the past her skepticism toward a wealth tax, if only because of its “very difficult implementation problems,” she said in an interview last month. But pressure from the Democratic Party’s left could at least force the Biden administration to formally review the idea.
—Pierre Briançon
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What Investors Should Know About the IPO Boom
The market for new stocks is experiencing a moment of exuberance not seen in roughly 20 years. But some investors in initial public offerings are growing more cautious of what they see as super-frothy valuations.
- So far this year, 302 U.S. initial public offerings have raised $102.3 billion as of March 10, according to Dealogic—up 763% for the same period in 2020. Special purpose acquisition companies, or SPACs, account for 80% of those IPOs.
- Fintech-company Stripe said on Sunday it has raised $600 million. The fundraising round valued the company at $95 billion, making it the most valuable start-up in the U.S. The company has long been considered as a candidate for an IPO, but has said nothing of having such plans.
- The red-hot IPO market has been a product of a long-running bull market, low interest rates, and a flood of liquidity in stocks as investors have few other places “where you can expect any meaningful yield,” says Dan Rosen, a partner at Commerce Ventures.
- More impressive than the volume has been the performance of these stocks. Over the past 12 months, the shares of 52 tech IPOs jumped an average of 65% on their first day of trading, according to data from Jay Ritter, a University of Florida professor who studies the IPO market.
- Many of these companies aren’t generating any earnings, raising concerns that this is the dot-com boom-and-bust all over again. The difference is that companies going public now tend to be more mature with real revenue and growth.
What’s Next: Some believe a correction is coming. “Not if, but when. Ultimately, I think it will end in tears,” Mark Hawtin, an investment director at GAM Investments, a European-based asset manager with $120 billion in assets under management, told Barron’s.
—Luisa Beltran
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Starbucks Becomes the Only S&P 500 Company With a Black Chairwoman
Mellody Hobson, head of one of the nation’s most prominent minority-owned investment firms, will become the only Black woman chairing an S&P 500 company Wednesday, when she succeeds current chair Myron Ullman at Starbucks.
- Hobson, currently vice chair at Starbucks and one of Barron’s 100 Most Influential Women in U.S. Finance, is also a director at JPMorgan Chase and co-chair of Ariel Investments, which manages $15 billion in assets. The first in her family to finish college, she graduated from Princeton University in 1991.
- Hobson, who says she drinks her Starbucks coffee black, told The Wall Street Journal that her goal as chairwoman is “to help the organization continue to scale to new heights,” adding, “I’m the band leader. I’m a person of color and that adds a fascinating dimension to our story.”
- Starbucks tied executive pay to diversity goals last fall, aiming for 30% of U.S. corporate and 40% of retail and manufacturing workers to be people of color by 2025. It began holding company wide antibias training in 2018 after a Philadelphia store manager called the police on two Black customers.
- On Starbucks’s plan to raise barista pay to $15 an hour, Hobson said, “Sometimes I think that the minimum-wage number has oversimplified the problem,” noting that “$15 an hour in San Francisco is different than $15 an hour in Selma.”
What’s Next: Less than 10% of directors at S&P 500 companies are Black. Hobson told the Journal she would grade board diversity in the U.S. a B-, adding, “the reason it’s not in the ‘C’ category is because in the last year or so, there has been a sea change.”
—Janet H. Cho
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***
—Newsletter edited by Anita Hamilton, Stacy Ozol, Matt Bemer, Ben Levisohn
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