We saw some decent economic numbers last week; it looks like things are thawing out after the long harsh winter. We also got another sign of improvement from two leading stocks last week — and they’re both travel stocks.
The ultimate discretionary experience is travel. If you are feeling uncomfortable about your financial condition, it is highly unlikely you will pack up the family and head to the beach or a Disney (DIS) resort. Businesses that are watching costs and pinching pennies are going to rely on video conferencing and phone calls rather than flying to an onsite meeting with potential and existing customers.
Bottom line: When travel is picking up, things are getting better. Last week two travel-related companies reported solid results that may indicate the economy is getting better faster than we thought.
TripAdvisor (TRIP), which calls itself “the world’s largest travel website,” reported an excellent quarter last week. TripAdvisor reported total revenue of $281 million, up 32% quarter over quarter and 22% year over year. Net income of $68 million, or $0.47 per diluted share, was up 240% sequentially and 10% over the year-ago period. TRIP missed the analysts’ estimates by about 1% but TripAdvisor raised guidance for the rest of the year — and that has Wall Street excited about the travel stock right now.
CFO Julie Brantley told investors on the earnings call, “With all the positive trends that we have seen year-to-date, we are increasing our full-year revenue growth outlook from mid-20s to high 20s to low 30s.” That’s the type of revenue growth that demands attention — and Portfolio Grader responded this week by raising the travel stock to a “B” ranking. Shares of TripAdvisor are a “buy” at the current price.
Priceline (PCLN) is best known for its “name your price” policy and fantastic advertising campaigns featuring folks like William Shatner — but investors know this travel stock can book solid returns, too. On Friday Priceline reported that first-quarter gross travel bookings of all travel services purchased by its customers came in at $12.3 billion, an increase of 34% over a year ago. Net income was $7.81 per diluted share, a little better than the analysts expected.
Priceline executives expect the good times to continue, projecting a year-over-year increase in total gross travel bookings and net income per share for the current quarter. Priceline has been either a “buy” or “strong buy” since August according to our stock-picking tool. The travel stock is ranked “B” by Portfolio Grader and remains a “buy” at the current price.
Even with the tough weather conditions in the first quarter, travel was picking up — and that trend should accelerate as we get into the traditional summer travel season. Both of these travel stocks are well positioned to benefit from the pickup.
Louis Navellier is the editor of Blue Chip Growth.