Pent-up demand with the easing of COVID-19 restrictions has helped the travel industry remain resilient against the rising inflation and declining consumer sentiment. According to a report by U.S. Travel Association, domestic leisure travel spending has surpassed pre-pandemic levels, while business travel is gaining traction and is expected to reach 81% of pre-pandemic levels this year.
Peter Kern, CEO of Expedia, said, "Despite the usual caveats for Covid, rising inflation to worry about, and of course the geopolitical situation, the pent-up demand that's out there for travel seems to be outweighing anything the market can throw at it."
Moreover, analysts expect an uptrend in travel stocks after BofA announced that consumers are still spending. "Our U.S. consumer clients remained resilient with continued strong deposit balances and spending levels," said CEO Brian Moynihan. Earlier this month, BAC reported an 11% increase in credit and debit card spending in June.
The U.S. Travel & Tourism market revenue is expected to grow at a CAGR of 4.7% to reach $211.10 billion by 2026. Thus, investing in popular travel and tourism stocks trivago N.V. (TRVG), Expedia Group, Inc. (EXPE), and Travelzoo (TZOO) could be rewarding.
trivago N.V. (TRVG)
Headquartered in Düsseldorf, Germany, TRVG is a subsidiary of Expedia Lodging Partner Services Sarl. The company operates a hotel and accommodation search platform globally. It offers an online meta-search for hotels and accommodation through online travel agencies, hotel chains, and independent hotels.
For the fiscal first quarter ended March 31, 2022, TRVG’s total revenue increased 165.9% year-over-year to €101.64 million ($103.80 million). Net cash from operating activities grew 186.4% to €12.10 million ($12.36 million). As of March 31, 2022, the company’s cash, cash equivalents, and restricted cash came in at €269.06 million ($274.79 million), up 39.1% year-over-year.
The consensus EPS estimate of $0.02 for the second quarter (ended June 2022) reflects an increase of 246.7% year-over-year. The consensus revenue estimate of $149.92 million for the same quarter indicates an improvement of 32% from the prior-year period. The company has also surpassed the consensus EPS estimates in three of the trailing four quarters.
Over the past month, the stock has lost 5.7% to close the last trading session at $1.48.
TRVG’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Quality and a B grade for Growth and Value. Within the Internet industry, it is ranked first out of 65 stocks. Click here to see the other ratings of TRVG for Momentum, Stability, and Sentiment.
Expedia Group, Inc. (EXPE)
EXPE is an online travel company operating through three segments: Retail, B2B, and Trivago. The company offers travel products and services, a loyalty program, hotel accommodation, advertising, and media services under five brands: Brand Expedia, Hotels.com, Vrbo, Expedia Partner Solutions, and Egencia.
On May 4, 2022, EXPE debuted its three-tiered strategy to redefine its place in the travel industry by introducing its new technology platform Expedia Group Open World, a reimagined marketplace that serves travelers, partners, and the industry. This platform is expected to deliver an e-commerce suite enabling anyone to enter the travel business.
EXPE’s revenue increased 80.5% year-over-year to $2.25 billion in the first quarter (ended March 31, 2022). Its gross bookings rose 58% from the year-ago value to $24.41 billion. Free cash flow grew 41.6% from the same period last year to $2.84 billion, while its adjusted EBITDA increased 398.3% year-over-year to $173 million.
For the fiscal second quarter (ended June 30, 2022), EXPE’s revenue is expected to increase 42% year-over-year to $3 billion. Its EPS is expected to grow 17% year-over-year to $4.13 in the current quarter. The company has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 2.3% over the past month to close the last trading session at $99.38.
EXPE POWR Ratings reflect solid prospects. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
It has an A grade for Quality and a B for Growth and Value. The stock is ranked #4 in the same industry. Click here to see the other ratings of EXPE for Momentum, Stability, and Sentiment.
Travelzoo (TZOO)
TZOO is an Internet media company that offers travel, entertainment, and local deals from travel and entertainment companies and businesses in Asia Pacific, Europe, and North America. Its products and publications include Travelzoo Website, Travelzoo iPhone and Android apps, Travelzoo Network, and Travelzoo Top 20 email newsletter.
On June 23, 2022, the company’s Board of Directors authorized the repurchase of up to 1,000,000 shares of its outstanding common stock. This share repurchase program is expected to boost shareholder returns.
TZOO’s revenues increased 29.2% year-over-year to $18.45 million in the first quarter ended March 31, 2022. Its gross profit rose 38.7% year-over-year to $15.62 million. Its non-GAAP operating income grew 333.9% from the year-ago value to $2.69 million, while its net income attributable increased 243.6% year-over-year to $2.36 million. Also, the company’s net income per share came in at $0.19, up 235.7% year-over-year.
The consensus revenue estimate of $80.38 million for the fiscal year 2022 (ending December 2022) represents a 27.2% improvement from the same period last year. Analysts expect TZOO’s EPS for the current year to increase 412.9% year-over-year to $0.78. It has surpassed the consensus EPS estimates in three of the trailing four quarters.
TZOO has gained 13.2% over the past month to close the last trading day at $6.52.
TZOO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. It has an A grade for Sentiment and Quality and a B for Value. Again, within the same industry, it is ranked #3.
In addition to the POWR Ratings grades I’ve highlighted, you can see the TZOO ratings for Growth, Momentum, and Stability here.
TRVG shares were trading at $1.49 per share on Monday afternoon, up $0.01 (+0.34%). Year-to-date, TRVG has declined -31.65%, versus a -16.45% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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