Are investors recovering from trips across America as diesel shortages loom? | Tech US News

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TravelCenters of America (NASDAQ: TA) highlighted the day after the company reported earnings. But not the way investors would like it. TA shares fell more than 20% after the company delivered a mixed earnings report. The company beat revenue but missed earnings estimates.



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We’ve seen companies fall short of earnings projections. And with TA stock up 15% in the 30 days leading up to earnings, this selloff may be investors recognizing they’ve been priced into a rhythm and getting the opposite.

That’s an explanation. And it may be true. The stock has been charging higher since setting a good pace on earnings in its second-quarter earnings call in August. But it’s also possible that this result is investors hedging ahead of news of likely diesel fuel shortages.

However, according to technical indicators, TA stock is starting to look oversold. In this article, we’ll ask whether investors should consider buying Travel America this fall.

The good news about the rise in diesel fuel prices

TravelCenters of America has increased their market share and is now using artificial intelligence to help them buy fuel. This is having the effect of improving the company’s margins, which have been growing. In the earnings report, CEO Jonathan Pertchick said: “Our fuel team continued to navigate uncertain macroeconomic conditions, delivering not only ample fuel supply to the field, but also a 24.9% increase in fuel gross margin compared to the previous year.”

The company’s internal estimates also show an increase in US diesel market share over the past three years. The company says it has gone from underperforming to outperforming.

The bad news about rising diesel fuel prices

On the conference call after the company’s earnings report, Perthick was asked about the company’s level of concern about the diesel fuel shortage. He noted that if the company ran out of fuel in some areas, it would be “infrequent and short-lived and … surgically focused (on) certain key areas or certain specific areas.” He went on to say that the company has no major concerns that would “measurably affect volumes.”

That may be true. But the simple fact is that supply is one thing; the demand is another. As early as February 2022, some small fleet operators were buckling under the weight of higher diesel prices. It is not a stretch to believe that more will be under pressure as diesel prices rise due to dwindling supply.

Demand may also be affected as fleet operators pass on their higher fuel costs. So far the consumer is holding up well. And they can continue to manage during the holiday season. But after that, it’s hard to say.

Can the convenience store company help TA stock?

Of course, how Casey’s General Store (NASDAQ: CASY) e Murphy USA (NYSE: MUSA), TravelCenters of America does more than sell gas. It’s a convenience store. And that makes the franchise a popular destination for travelers. At the time of writing, there is no consensus on what consumers will do.

However, with travel and entertainment stocks continuing to perform well, it’s fair to speculate that there is still pent-up demand for travel. That could be a boon for Travel America. But the company has much smaller margins on its convenience store products.

Is it a TA stock purchase?

The post-earnings selloff has pushed the stock below its 50-day simple moving average (SMA). However, the stock price is still comfortably above the 200-day SMA and appears to be technically oversold. Adding to the upside is the price-to-earnings ratio, which stands at 6.3x.

But does this mean you should buy TA stock? The consensus of analysts polled by MarketBeat gives the stock a moderate buy rating with a price target of 62.80. This represents a 27% increase from its current price.

That said, the latest selloff has turned the stock into a negative for the year. And with the Federal Reserve just raising interest rates another 75 basis points, there may be another drop to come. That makes TA stock a hold for me until there is more clarity on the broader economy.

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