Travel Stocks to Book: Expedia (EXPE)
Among travel stocks, it makes a lot of sense to go big or go home – and that’s one reason why Expedia (EXPE) and rival PCLN are attractive right now.
Expedia recently beat the Street with earnings of 16 cents a share on $1.2 billion in revenue. One key to success: Expedia’s marketing partnership it inked with Travelocity last year. In the cut-throat online travel market, “co-opetition” has been a win-win for EXPE and Travelocity in the U.S. and Canada.
EXPE’s revenue for the most recent quarter rose 19% and its gross hotel bookings jumped by 29%. Solid performance from its domestic business has helped EXPE stock gain about 25% over the past year, but the company also is redoubling its efforts in international travel markets, particularly Asia. That’s key to EXPE’s growth given that international sales account for nearly half of its revenue.
With the rollout of its new Expedia Travel Preference (ETP) program which offers greater flexibility in booking and payment, Expedia is taking aim at rival Priceline’s agency model.
EXPE stock also looks good at the periphery. It has a forward P/E of 16 and a PEG ratio of 1.2, so valuation isn’t bad at all. It also has repurchased 2 million shares in the past year, and it pays a small dividend (0.8%) yield — nothing to write home about, but does speak to the company’s stability.
If EXPE stays the course in achieving economies of scale through partnerships like the Travelocity agreement — and continues to deliver shareholder value with stock repurchases and dividends — Expedia could be poised to keep soaring into 2015.