That travel stocks have suffered a lot recently is no secret. In fact, they continue to do so. I hold three travel stocks in my investment portfolio. The first is the FTSE 100 aviation stock International Consolidated Airlines Group. The other two are the FTSE 250 coach operator National Express and the budget airlines company easyJet. All three of them have had an underwhelming past year, because of continued uncertainty pertaining to the pandemic. But not all travel stocks are made the same. Consider, for example, this penny stock.
Air Partner upgrades profit expectations
Air Partner (LSE: AIR), which provides air charter services along with aviation security solutions, has seen a 29% increase in share price over the past year. And it appears that things are about to get even better for the stock, which is priced at just 89p as I write. It upgraded its profit expectations for the year ending 31 January 2022 just yesterday. It now expects underlying profits to be “materially ahead of market expectations” compared to how things looked at the time of its last update in December last year.
The company, with a market capitalisation of £55m, has also managed to remain relatively financially healthy over the past couple of years, despite the pandemic. Both is revenues and profits took a hit during 2020, but have recovered quite a bit last year. And going by its latest update, it appears that they will be even more robust than initially envisaged.
The case for a further rise in the penny stock
Since travel stocks are sensitive to the economy, especially in the pandemic, I think that as the recovery takes firmer root in 2022, Air Partner could do even better. Additionally, its relative price could make a case for buying the stock for my portfolio as well. Its present price-to-earnings (P/E) ratio is 21.5 times. However, if its profits exceed expectations, I expect it would fall to much lower levels.
And a profitable, growing company with a low P/E is a sure sign to me that its share price could rise much more. Of course, I will be able to forecast its share price with greater accuracy only once we have the numbers for the full year. But we do have something to work with even now. According to Financial Times, the one analyst who has made 12-month projections for the penny stock expects a pretty big 40% increase in its share price.
What I’d do
It goes without saying that all forecasts are subject to change. Especially now, I reckon, because the pandemic has created just so much more uncertainty than we would normally expect. And it is nowhere near its end it seems! But, at the very least, our capacity to deal with it is significantly improved. And just for that reason, I think we could see at least some economic recovery in 2022, which in turn could lead to much potential growth in the Air Partner stock. I’d buy it now.
Manika Premsingh owns International Consolidated Airlines Group, National Express Group and easyJet. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
