Saturday, July 20, 2024

Buy This Breakout Growth Stock to Profit from India’s Travel Boom

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Over the past year, AI chip darling Nvidia (NVDA) soared 219%. Great, right?

Yes, but it was topped by an online travel company from India – MakeMyTrip Ltd (MMYT). Its stock soared 235% over the past 52 weeks.

An Indian company beating the mighty Nvidia? Yes… and here’s why.

India’s Travel Boom

It is well known that India is the world’s most populous country, with an estimated population of 1.442 billion people. It surpassed China in 2023.

But what investors often ignore is that India also has a rapidly growing middle class. That is no doubt thanks to its rapid economic growth, with the world’s fastest-growing large economy. In its latest quarter, GDP grew by 8.4%.

Exact figures are hard to measure in India. But a good estimate about the size of the middle class came from People Research on India’s Consumer Economy (Price), a not-for-profit research firm that conducts household income surveys. It found that there are about 432 million middle-class Indians — about one in every three people.

Forecasts are that India will add 140 million middle income households, as well as 50 million high income households, by 2030.

Many of these middle and upper-income people have already discovered the pleasure of traveling on vacations. “More Indians are traveling than at any time in history,” according to an annual study from Mastercard (MA).

In 2022, India became – for the first time – Asia’s highest source of international travelers, according to tourism consultancy IPK International. International travelers from India in 2022 exceeded those of China, South Korea, and Japan.

The U.S. tourism sector took note. “New markets like India may offset (other countries) and help us grow in the long run,” said Geoff Freeman, CEO of the U.S. Travel Association. Travelers from India to the U.S. now easily exceed pre-pandemic levels.

The hotel industry has also noticed. Last year, former InterContinental Hotels Group PLC (IHG) CEO Keith Barr said, “When you think about the power of the Chinese (international) traveler (due to) that rising middle class and wealth creation there, India is going through the same evolution too.”

The Asian Development Bank agreed. Last May, it said that India could emerge as the next China “in terms of outbound tourism growth” over the next decade.

Indian tourism will be especially important for southeast Asia. For example, bookings to Thailand this year are up 35%, Thailand’s tourism ministry reports, including a record number of Indian tourists.

More Growth to Come

We are just at the beginning of the growth curve for Indian tourism.

Only 6.6% of Indians, or about 93 million people, held passports in 2023. And even after recent relaxations, just 61 countries allow visa-free access for Indians. This compares to almost 200 for many developed-economy nations, according to Henley & Partners, an immigration law firm.

Indians made only about 13 million international trips in 2022. However, according to the consultancy firm McKinsey, that number will explode to more than 80 million annually by 2040.

And even by 2030, Indian tourists will become the world’s fourth-largest spenders on overseas travel. This is the estimate from Booking Holdings (BKNG), the world’s leading provider of online travel. It estimates Indian tourists will splash out $410 billion annually, almost triple the level in 2019.

Not surprisingly, the growth is being propelled by the aforementioned and increasingly affluent middle class. They have spent 25% more on travel so far this year than in the same period in 2023, according to the travel agency SOTC India.

The growth is also being pushed along by India’s young. Its Generation Z, those born in the late 1990s and early 2000s, almost immediately plan an overseas vacation as soon as they land a decent job, flight-booking website Skyscanner reports.

Keep in mind that, by 2030, India will add nearly 90 million new households headed by millennials, who were born into liberalized India.

Buy MakeMyTrip Stock

Fortunately for U.S. investors, there is an easy way to play this travel megatrend profitably. It is through MakeMyTrip, which is listed on the Nasdaq. It is the pioneer of online travel bookings in India through its three leading brands: MakeMyTrip, Goibibi, and Redbus.

MakeMyTrip offers easy and instant travel bookings, providing comprehensive choices including flights, hotels and homestays, holiday packages, and even cabs, buses and trains. The company also recently launched segments that provide travel solutions to corporations and their employees, and a comprehensive travel suite for travel agents.

The company is definitely in the sweet spot. The online travel market in India is expected to grow from just $12 billion in 2022 to $60 billion in 2030!

MakeMyTrip is already doing well, reporting its best-ever financial performance during fiscal year 2024 in terms of both gross bookings and profits.

MMYT stock is a buy on any general market weakness. Its current price is $90.52.

www.barchart.com

On the date of publication, Tony Daltorio did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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