Sydney Airport Share Price Lower on Traffic Data, Why It’s No Surprise

Shares in Sydney Airport Holdings Pty Ltd [ASX:SYD] are trading slightly lower today, upon the release of airport traffic data.

In a year that has virtually been devoid of tourism and travel, the SYD share price has held up remarkably well.

In fact, shares are trading at a level akin to the price seen at the beginning of 2019, suggesting that investors still see value in holding a company whose business has almost been obliterated.

ASX SYD Share Price Chart

Source: Tradingview.com

With promise of a vaccine to be delivered soon, SYD shares jumped big time last week.

At the time of writing, the SYD share price is down 0.88%, or 6 cents, to trade at $6.80 per share.

Is anyone surprised by poor traffic numbers?

SYD today released passenger traffic numbers for the month of October and the numbers tell a story we’ve probably heard before: the travel industry is currently lifeless.

Total passenger traffic in October 2020 was 225,000 passengers, down 94.3% on the prior corresponding period.

38,000 international passengers passed through Sydney Airport in October, down 97.4%.

While Domestic passengers totalled 187,000 for the month, down 92.6%.

These numbers probably don’t surprise anyone.

However, if we take a closer look at month-on-month data, we might be able to detect a pulse.

Domestic passenger numbers have been slowly increasing in Sydney since August, growing from 91,000 to 187,000 in October.

The modest recovery in domestic traffic in October was driven by the lifting of travel restrictions between NSW and South Australia, and NSW and the Northern Territory, SYD said.

From September to October, passenger traffic increased ~90% — almost double.

Of course, total passenger numbers remain drastically low, although the stark uptick in past months could hint at the elasticity of passenger numbers once restrictions are eased.

Does that mean Sydney Airport shares are a good buy?

The current pandemic has exposed the risks of travel and tourism stocks like SYD that most would have never considered.

SYD also believes the downturn in passenger traffic will persist until further government travel restrictions are eased, which has been difficult to predict.

However, its current price level could indicate a generally brighter outlook for the tourism and travel industry despite the current recession.

Given how well Australia has managed the pandemic, we could see a return to normality sooner rather than later.

Guns N’ Roses announced yesterday that they’ll be returning to Australia to play six stadium shows in November 2021.

There are could be a host of other artists and performers looking at Australia too.

If allowed to go ahead, we could then see a return in tourism and travel.

Where you think there’s value in SYD could depend on your outlook of the Australian economy once lockdowns end. However, we’ve identified four small-cap stocks which are well positioned to capitalise on post-lockdown megatrends, irrespective of your outlook. Make sure you check out these four innovative stocks in our latest report — download your free copy here.

Regards,

Lachlann Tierney,
For Money Morning


Lachlann Tierney is an Analyst for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. Recently he has been working with Ryan Dinse. Lachlann is involved in two publications:


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