Some analysts predict that the economy is in for a bumpy landing, and they might have a fair point. Businesses are still trying to recover from the damage caused by the novel coronavirus. This makes travel stocks, and particularly companies involved in booking trips, a not-so-obvious trade.
If you have a taste for the not-so-obvious, though, then travel stocks might be right up your alley. Indeed, the recovery phase of the economic cycle could propel the trip-booking niche to new heights.
Consider these three names as the leaders in this sub-genre of travel stocks:
Ready to book your trip to outsized returns? Just make sure you’ve planned your itinerary carefully because after all, any stock can go north or south.
Travel Stocks to Buy: Expedia Group (EXPE)
Investors in EXPE stock don’t need to be told just how destructive the spread of the coronavirus has been to the travel market. The company’s first-quarter earnings results reflected this. And unfortunately, Expedia did show a loss in earnings per share for the quarter.
It wasn’t all terrible news, however. Expedia did report quarterly revenues of $2.21 billion, which was in line with what Wall Street was expecting. CEO Peter Kern was willing to acknowledge the challenges that lie ahead, while also noting that Expedia took measures to shore up its fiscal position.
Expedia “raised significant additional capital, to further strengthen our liquidity position as we navigate this disruption and position the business for recovery,” explained Kern.
And indeed, Expedia did raise $3.2 worth of new funding in April. EXPE stockholders can therefore at least know that the company is proactively fortifying its capital base in preparation for the industry’s eventual recovery.
A well-known brand name in online trip booking, Tripadvisor has endured the same pressures as its competitors in 2020. Social distancing and shelter-in-place mandates have put pressure on both the company and the TRIP stock price this year.
In light of this, CEO Steve Kaufer has had to make some tough decisions. For one thing, he announced that Tripadvisor will lay off around 25% of its workers. The planned layoffs will impact approximately 900 of the company’s employees.
Moreover, among those workers not laid off, some will be given a pay cut. The company also plans to get rid of some of its offices. These cost-cutting measures might reassure TRIP stockholders, along with the company’s comfortable cash position, as reported by Ernst Teunissen, TripAdvisor senior vice president, CFO and treasurer:
“Even under very adverse scenarios … even under scenarios with little or no recovery in travel in 2020, we are confident we have now both the liquidity and the ability to stay compliant with covenants over the next two years.”
With that in mind, TRIP stock could offer a compelling value proposition to traders who are willing to stay the course.
Booking Holdings (BKNG)
A specialist in helping travelers book their trips online, Booking Holdings is known for owning Priceline.com and Booking.com. Like the other companies mentioned in this list, Booking Holdings has struggled amid the spread of the pandemic.
Still, the company’s shares have staged an impressive rebound without reaching overbought levels. It’s not the cheapest stock in the world, but BKNG stock could actually be considered a bargain on a relative basis. A trailing 12-month price-to-earnings ratio of 21.21 suggests a very reasonable valuation among Booking Holding’s peers.
CEO Glenn Fogel has assured the company’s shareholders that Booking Holdings has “taken immediate steps to stabilize the Company by reducing costs and bolstering our liquidity position.” And compared to the tremendous fiscal damage we’ve seen in the sector, a 19% year-over-year decline in revenues during 2020’s first quarter certainly isn’t the worst possible outcome.
Perhaps some stability will come to the travel industry in the near future. If it does, then there’s plenty of room for BKNG stock to run.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. As of this writing, he did not hold a position in any of the aforementioned securities.