It’s the most wonderful time of the year! No, not the holidays, where it’s cold and everyone’s pushing past each other at the mall to snag unnecessary gifts.
I’m talking about summer, when people actually shut down their laptops for a week or so and take time to get away from day-to-day life and simply kick back in the sun.
That doesn’t mean you should take a vacation from savvy investing, though. Instead, your savviest move might just be to invest directly in vacations by snatching up shares of two leaders in the online travel booking space: Expedia (NASDAQ:EXPE) and Priceline (NASDAQ:PCLN).
EXPE stock has been in the news a bit more prominently late thanks to its big-time purchase of Orbitz, but — and this is a big one, especially for all you bargain-shoppers out there — PCLN stock might just be a better deal.
Let’s compare some key metrics for each and decide which makes for a better summer destination for your cash.
- Recent stock performance: To start, let’s compare recent returns for folks that have already bet on these travel leaders. EXPE stock is the winner so far this year — largely thanks to optimism surrounding the aforementioned Orbitz purchase — with a head-turning 24% climb in the books so far this year despite recent relative weakness and a 1% selloff today. Zoom out a bit more and shares have soared 43% over the last 12 months. Talk about hot! PCLN stock on the other hand has had a bit of rockier year, up only 4% in 2015 and down 5% over last 12 months.
- Valuation: As we also mentioned already, though, the recent strength of EXPE stock is hardly a buy signal for folks looking to just jump in. Because of the run, the stock has a forward price-to-earnings ratio of 21 vs. a ratio of less than 18 for PCLN stock. EXPE stock is trading at a higher multiple despite the fact that it’s slated for slightly lower long-term earnings growth (17% per year for the next five years vs. 18% annually for Priceline).
- Analyst Consensus: If you ask Barclay’s, though, that slight premium for EXPE stock is worth it. The company recently rated Expedia “overweight” and gave it a $125 price target, while shrugging at PCLN stock and giving it an “equal weight” rating. The logic again goes back to Orbitz; Barclays cited consolidation and M&A as the main growth driver, writing: “Expedia has been the travel name to own the past 12 months and that is likely to continue.” The median consensus for Expedia is a bit lower, of course, at $108 — which is only $3 and 3% higher than the current pricetag. For Priceline, on the other hand, the analyst consensus leaves room for upside of 15%.
- Key differences: Of course, it is important to remember that Priceline and Expedia aren’t necessarily apples-to-apples comparison or even direct competitors in the ways you might think. The two companies have very very different geographical behaviors … and there’s a good chance both could be poised to chug higher as the economy continues its recovery and leisurely spending grows.
- The Verdict: EXPE stock isn’t exactly a bargain, but it’s hardly a rip-off in today’s frothy market. Considering the company also tosses out a dividend, the recent weakness in shares could make for a perfect buying opportunity. Meanwhile, if you want a little more risk with a little more potential upside, sideways-moving PCLN stock isn’t a bad bet considering its long-term earnings prospects and attractive valuation.
As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.
