Travel and leisure stocks are outperforming after the Fed rate cut

Travel and leisure stocks saw solid gains on Thursday after the Federal Reserve cut its benchmark interest rate for the first time in more than four years.

Notable advancers in morning action included Airbnb (NASDAQ:ABNB) +6.4%, Sonder Holdings (SOND) +4.8%, Las Vegas Sands (LVS) +3.6%, Expedia (NASDAQ:EXPE) +3.4%, Hilton Grand Vacations (HGV) +3.5%, Travel + Leisure (TNL) +3.2%, Red Rock Resorts (NASDAQ:RRR) +2.9%, Marriott Vacations (VAC) +2.8%, MGM Resorts (MGM) +2.6%, United Parks & Resorts (PRKS) +2.4%, and DraftKings (DKNG) +2.2%.

The FOMC rate cut was highly anticipated by investors, meaning that some of the upside for companies on their balance sheets from lower interest rates may be already baked into their share prices. However, Deutsche Bank singled out a casino stock that may have some unrealized potential. Analyst Carlo Santarelli said Red Rock Resorts (RRR) is proceeding more quickly than anticipated with a casino project in the southern Las Vegas valley after the success of the Durango Casino & Resort. Deutsche Bank is positive on Red Rock Resorts (RRR) in general on its view that the Las Vegas locals market is stable. “The locals promotional environment remains active, though unchanged on a sequential basis. Valuation remains attractive, with RRR offering about a 10% FCF yield on the core operations and the development pipeline is unparalleled within the gaming space,” highlighted Santarelli.